BP oil spill: the City\’s non-reaction to the BP report
One hundred and ninety three pages and months of work, but barely a flicker in the Square Mile.
The share price barely moved ( a little over 1%). So, markets are efficient then?
Robert Talbut, chief investment officer at Royal London Asset Management, said the report had been in line with expectations but also warned of the likelihood of more damning investigations in the US.
The market had already processed the information that it wasn\’t BP alone responsible, that other companies would have to chip in.
Markets are efficient at processing the information available to them about what prices in those markets should be (note, this is all we mean by market efficiency).
Only if the report came out with something very different from the information already available to the market would we have seen a move in the share price.
Yes, it is a rather circular argument but that\’s because the claim about market efficiency itself is so small. We\’re not claiming in that phrase that markets efficiently allocate capital, that they efficiently make the world a better place or that they\’re efficient in a way that government is not (although all of those things might be shown through other lines of argument and evidence).
Only and purely that markets process information efficiently.