Financial Market Efficiency Index (FMEI) - A Qualitative Tool for Financial Markets

Abstract

Government, Regulators, Exchanges, Banks and Institutions collectively make policies and invest huge amount of resources and time to improve the financial system ultimately targeting a more efficient market. The turnover and earning statistics only reveal the quantitative expansion of the market. The statistics don’t reveal the qualitative development of the market in terms of improvement in Market Efficiency. Robust market structure and sustainable growth of any market is only possible when the development is grounded on both Qualitative (Market Efficiency) and Quantitative (Turnovers and Earnings). Studies and researches in past have always given importance to assess the scale of efficiency of the market. However, the market efficiency was always checked through some efficiency tests at staggered time frames. The need of the hour is a transparent and easy to understand tool that can measure the market efficiency on a continuous basis with a universal applicability. This research proposes an efficiency measurement tool, “Financial Market Efficiency Index - FMEI”. The Index would derive its parameters from the broad market Index of any country to assess and compare the efficiency across the market. The index would not only measure the Qualitative growth (Market Efficiency) of any market but also compare the market efficiency of all the countries of the world. This would facilitate the stakeholder to take most appropriate decisions to improve their respective markets.