Since the crisis began, if there is a word that we hear almost repetitively, it is the word efficiency. I have used it on several occasions to describe precisely what the Spanish workers did not have, speaking of productivity, and that it would possibly do us much good to pass this bump. But, and Spain as a country, is it efficient?
If you never understood the perfect competition model, feel calm and have a good time to discover the qualities of these types of markets; maybe even Spain is …
Estimate of the intrinsic value of the value of the market itself
The economy, a company, an employee or the market itself is efficient by nature yes, and only yes, the competition that exists or exists between the agents that are at the same level and whose only real purpose is to follow a fight evolution To get the maximum benefit. This fight leads to an equilibrium situation, where almost any asset (work, money, gold, financial assets, etc.) is an estimate of the intrinsic value of the value of the market itself.
This, which is highly theoretical and we could openly explain in the famous theories and hypotheses of efficient markets (the intermediate, weak and strong hypothesis), has a simpler explanation for what we want to try to discover, taking it only to an application point. : our financial markets.
The competition between agents (investors), guided by the search for maximum benefit, leads to an equilibrium situation in which the price of any financial asset (shares, obligations, public funds, etc.) constitutes a good estimate of its intrinsic value.
Of course, and without being Taliban of the market, this phrase any financial market fulfills; always looking for the greatest personal benefit and estimating the intrinsic value thanks to the financial assets that each of the investors have in their portfolio .
Here is where the key part of the topic comes, what conditions must the Spanish stock market meet to know if it is efficient or not, the only way to boost the crisis? In my opinion, I should follow the three famous guidelines of Foster ( Common Stock Ivnvestment) where it points out that the three main conditions (and I totally agree with him) of the efficient market are:
Existence of countless buyers and sellers
I think they are the perfect, fair and more deterministic keys that exist today on the theory of efficient markets. Many others bet to go to major complications, based on the theory of selection of efficient portfolios or baskets, even in the balance of the capital market; I see them too complex theories, which need a lot of support behind.
Based on these three Foster guidelines, would Spain be efficient?
The homogeneity of our market , in my opinion, is clear; but ask the CNMV whose work as the governing body is just that, that neither a company or asset is objectively better for one than for another.
As for the ease of entering and leaving the market … today from our home we can all enter and leave the financial markets thanks to the Internet, selling and buying. It is clear that the facility is growing to be part of the financial markets.
And finally, the key point, are there really innumerable buyers and sellers? In my opinion, no. For this, we only need to see the IBEX chart, the evolution, during the last months:
Since the maximum daily volume of a few months ago (end of September of 2008) the volume rhythm, has only declined clearly. With the drop of more than 10% in recent days, other indicators such as the RSI, or the SMA , do nothing but show that the market is stopping and if it has been inflating from the minimum of 6,500 points is because the large Investors were trying to support the market to see if they could make it better.
Where financial markets really help to lift the economy
Here is the problem, therefore, of our market. We will be efficient, or again we will be, when we get a real trust from each and every one of the investors, especially small investors , so that they come back into the game of buying and selling. That is where financial markets really help to lift the economy from this crisis that seems to never end.