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"Perfect market"

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › "Perfect market"

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by AvatarJohn Moffat.
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  • March 19, 2015 at 11:21 pm #233391
    AvatarS
    Member
    • Topics: 3
    • Replies: 0
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    If the shares of both companies traded in a perfect market what should a rational investor do and what should happen to the share price of both companies?

    March 20, 2015 at 7:11 am #233405
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54839
    • ☆☆☆☆☆

    It would depend what level of risk the investor wished to have, because the level of return would be higher or lower depending on the riskiness of the company.
    Were it a perfect market then nothing would happen to the share prices because they would already be correctly valued.

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