The Key Difference Between Market Efficiency and Market Inefficiency

Market Efficiency vs Market Inefficiency
Feature	Market Efficiency	Market Inefficiency
Definition	A condition where asset prices fully reflect all available information.	A situation where asset prices do not accurately reflect all available information.
Price Accuracy	Prices quickly adjust to new information and represent true value.	Prices may lag or deviate from true value due to information gaps or delays.
Information Availability	Information is widely and freely available to all market participants.	Information asymmetry exists; some participants have more or better information.
Trading Opportunities	Few or no opportunities for excess profits through trading.	Arbitrage and profit opportunities exist due to mispriced assets.
Market Types	Examples: Efficient markets like major stock exchanges under EMH (Efficient Market Hypothesis).	Examples: Emerging markets, thinly traded stocks, or markets with regulatory issues.
Investor Behavior	Rational investors act on all available information quickly.	Behavioral biases, speculation, and misinformation affect prices.
Impact on Price Prediction	Price movements are largely unpredictable (random walk theory).	Prices may be predictable due to trends, patterns, or anomalies.
Role of Regulation	Strong regulations promote transparency and fairness.	Weak regulations may contribute to inefficiency.
Examples	Large, developed markets like NYSE, NSE.	Small-cap stocks, some commodities markets, or newly emerging exchanges.