In many emerging markets,stock exchanges do not have big capitalizations.This refers to which type of inefficiency?
A) Operational efficiency
B) Allocational efficiency
C) Informational efficiency
D) Liquidity efficiency

Question

Quizplus · Accepted Answer

Allocational efficiency refers to how well financial markets allocate capital to its most productive uses. In this case, the stock exchanges in emerging markets having low capitalizations may indicate inadequate allocation of capital. This can be due to various inefficiencies such as lack of information about the companies listed, insufficient liquidity, or regulatory and operational constraints. Therefore, choice B - Allocational efficiency - best describes this inefficiency.

In Many Emerging Markets,stock Exchanges Do Not Have Big Capitalizations