Capital Market Efficiency Assignment Example | Topics and Well Written Essays - 500 words

Capital Market Efficiency - Assignment Example Public companies are able to support various projects through corporate social responsibility. These projects have a significant role in improving the living standards of the people in the society. On the other hand, increased certainty on the future prospects strengthens the competitive position of the company in the market (Moyer, McGuigan, & Rao, 2015). This makes it possible for the firm to diversify its operations and even invest overseas in order to reduce the risks and uncertainties associated with focusing on a single market. Question 3An efficient portfolio is one that brings in the highest returns with the lowest risks for any given return (Moyer, McGuigan, & Rao, 2015). An efficient capital market enables the present value of the future cash flows to be indicated in the current prices of the securities. As a result, the information would be significant in enabling the investor to select the best portfolio to invest in which have the lowest risks. This would enable the inve stor to make immense returns. In many cases, management team consult the shareholders on capital budgeting and capital structure decisions because of the risks associated with these decisions. However, managers can make these decisions in case they are certain about the outcome. This is through consulting professionals and insuring the decisions in order to be compensated in case they incur losses. Efficient capital market provides both the firm and the investor with real time information (Moyer, McGuigan, & Rao, 2015).