Efficient market

An efficient market is a market where the prices reflect all the available information. There are not many efficient markets in the world, they might not exist at all.

The conditions for an efficient market is that all information is available at no cost and that this information is accurately reflected in the market prices. The actors on a market must be rational for it to be an efficient market, make decisions on expected return only.

In an efficient market, there is no extra return to perform insider trading. Insider trading means that there are actors in a market that has more information than the other actors. You can not make risk-free profits in efficient markets. To create a reasonably efficient market, one can prohibit insider trading. The traders in the market will hopefully have the same information in a market without insider trading.
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efficient market, hypothesis, farma, insider trading