Which factor is included in the efficiency of financial markets?

The efficiency of financial markets is significantly influenced by price determination, which reflects how well prices in the market reflect all available information. When markets are efficient, it means that stock prices adjust quickly and accurately to new information, ensuring that they embody the true value of the underlying assets. This ability to facilitate the rapid incorporation of information into prices is a key characteristic of efficient markets.

High transaction costs, secrecy of transactions, and limited access to information can hinder market efficiency. High transaction costs can deter trading, leading to less liquidity and potentially mispriced securities. Secrecy can prevent the disclosure of crucial market information, causing discrepancies between actual asset values and their market prices. Similarly, limited access to information can ensure that not all investors have the same knowledge, leading to poor price formation and inefficiencies. Thus, price determination stands out as the fundamental aspect that shapes the concept of market efficiency.