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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Allocational Efficiency


Here's the theory: if markets were efficient, capital would be used in a way that had benefits for everyone—customers, companies, and investors.

The idea is that there is a near-perfect balance where companies make the right amounts of the right stuff using the right techniques while keeping costs fair so that customers get what they want at good prices, jobs are plentiful, investors profit, and everyone sits around their dining room tables holding hands and singing Kumbaya.

Look out the window—we’re definitely not there yet (and not just because no one knows the words to Kumbaya).