How much deadweight loss friction constricts the market from being...efficient? Like...are there a lot of taxes or commissions making what should otherwise be a smooth, liquid, easily-trading market...choppy?
Hit The Wayback Machine and go to a trading desk at the biggest stock brokerage in the country at the time in Merrill Lynch. The era was rife with human processing, and had few computers. Along distance call from New York to Los Angeles was like three bucks a minute. A given trade of 10,000 shares of IBM, for a total transaction value of 10 grand, might have cost $500 in commission; today that same trade might cost 10 bucks. The market, which used to be highly inefficient, loaded with human workers and not-so-much with computers, changed dramatically to get rid of transaction friction, such that much more of buyer's dollars went to buying what they wanted to buy, rather than paying commission to their brokers. Or taxes. Or other fees for a witch to bless the transaction while dancing naked in front of a fire.
Way more efficient market today...but yeah, way less fun.
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Finance: What is Efficient Markets Theor...141 Views
Finance a la shmoop what is the efficient markets theory well
there should just be a big picture of Warren Buffett right here it should be [Two men carrying a framed picture of Warren Buffett]
the man Warren explaining the efficient market theory himself and that theory
states that it's impossible to beat the market over a sustained period of time
it should be Warren Buffett who explains that all relevant information comes [Warren Buffett giving a presentation on stage]
public in public stocks and that the market more or less immediately
incorporates all that information in its pricing
hence nobody can ever beat the market over a long period of time so why should [Men falling asleep during a presentation]
Warren Buffett be giving this little definition because the efficient market
theory is wrong Buffett has beaten the market for decades in a row in every way [Warren Buffett beating up the market with a stick]
shape and form so you have a really memorable huge figure in finance this
guy and then pipsqueak professors who are kind of a laughing stock whenever the [Professor jumping on the microphone stand trying to talk]
wealthy power crowds gather in Omaha for their National Convention that's what
they say at the Woodstock of Finance if you will fortunately most people keep [Man with arms folded standing naked in a corridor]
their clothes on for this one
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