Market Efficiency - Module 3 – EQUITY – CFA® Level I 2025

Download PDF Now: https://www.finquiz.com/cfa/level-1/summary/ 2025 Prep Packages for the CFA® Program exam offered by FinQuiz Pro (notes, summaries, question bank, mock exams, and formula sheet): Level I: https://www.finquiz.com/cfa/level-1/ Level II: https://www.finquiz.com/cfa/level-2/ Level III: https://www.finquiz.com/cfa/level-3/ Dive deep into one of the most crucial CFA® Level 1 Equity topics: Market Efficiency. In this comprehensive lecture, we break down weak, semi-strong, and strong form market efficiency—exploring how quickly and accurately markets incorporate public and private information into stock prices. Learn why market anomalies like the January effect, momentum, and IPOs sometimes challenge efficient-market theory, and discover how behavioral biases—such as herding, loss aversion, and overconfidence—can impact investment decisions. By understanding market efficiency and investor psychology, you’ll be better equipped to tailor technical and fundamental analysis strategies for portfolio management. Plus, find out how FinQuiz Battle Ready Summaries can streamline your exam prep with clear, concise breakdowns of key CFA concepts. Strengthen your grasp of equity market efficiency and position yourself for success on the CFA Level 1 exam. 00:00:00 – 00:05:00 | Introduction & Overview • Welcome, course objectives, and study resource plug • Importance of market efficiency for CFA Level 1 00:05:00 – 00:12:00 | Defining Market Efficiency • What an efficient (informationally efficient) market is • How stock prices react instantly to new public information • Example: Tech news and immediate price adjustments 00:12:00 – 00:20:00 | Market Efficiency in Action • Explaining why you can’t “beat” the market with public data • The role of risk-adjusted returns and no “free lunch” • Real‑world example (Netflix’s rapid reaction) 00:20:00 – 00:28:00 | Market Value vs. Intrinsic Value • Difference between the sticker (market) price and intrinsic value • How investors use these concepts to spot mispricings • Implications for active versus passive strategies 00:28:00 – 00:35:00 | Factors Influencing Market Efficiency • Key drivers: market participants, information flow, and trading costs • Regulatory measures (e.g., Reg FD) and limits to arbitrage • The impact of information acquisition costs 00:35:00 – 00:43:00 | Forms of Market Efficiency (EMH) • Breakdown of the three “flavors”: weak, semi‑strong, and strong • How each form affects technical and fundamental analysis • Why only insider info might give an edge in semi‑strong/strong markets 00:43:00 – 00:50:00 | Investment Strategies in Efficient Markets • What market efficiency means for beating (or not beating) the market • Active versus passive investing insights • How efficient pricing drives capital allocation 00:50:00 – 00:58:00 | Market Anomalies & Behavioral Finance • Overview of market anomalies (time‑series and cross‑sectional) • Discussion of investor psychology and common behavioral biases (loss aversion, overconfidence, etc.) • How these biases and anomalies create temporary opportunities—and why they eventually disappear 00:58:00 – 00:58:39 | Conclusion & Final Thoughts • Recap of key takeaways on market efficiency • Final encouragement for CFA candidates and a reminder to review supporting materials