Market efficiency can be divided into three types: allocative efficiency, operational efficiency, and informational efficiency. Allocative efficiency is concerned with whether funds are directed to their most productive uses. This is mainly a primary market issue; the primary market being the market in which borrowers issue securities and receive payment from the initial investors (the word borrowers here includes companies that raise money by issuing shares although, strictly speaking, share issuance is not borrowing). Allocative efficiency is concerned with the issue of which borrowers receive the finance. An allocatively efficient market is one in which the available funds go to the borrowers who will make the most productive use of them. Allocative efficiency is not the main concern here. However, it is important to be aware that allocative efficiency is dependent on operational and informational efficiency.

Allocative efficiency is dependent upon securities (shares and bonds) being accurately priced. Accurate pricing requires informational efficiency. If securities are not accurately priced, investors could direct their money to uses that are not the most productive. For example during 1999 and early 2000 shares in Internet-related companies were seriously overpriced. For those people establishing Internet-related companies, the proceeds from share sales heavily exceeded the costs of establishing the companies. So there was a great incentive to set up Internet-related companies.

Too many Internet-related companies were created and most of them subsequently failed. The overpricing of shares issued by Internet-related companies had caused too much money to be invested in such companies. Much of this money could have been invested more productively elsewhere.

With the above information as reference, address the following Market efficiency questions in relation to the Ghanaian context:

How asset prices move to their new levels in Ghana if no one is able to profit from trading in the assets following the emergence of new information?

Mr. Joe Asare, a pensioner is unsure of the best investment to capitalise his pension money. He has therefore approached you to educate him on the stock market in Ghana to help him to determine whether individuals funds invested in securities in Ghana are directed to their most productive uses to guarantee regular higher returns. As an investment analyst, evaluate the Market efficiency of the Ghanas securities.

1. An introduction that:

• Set up the topic and approach for addressing the challenge stated above above,
• Present the topic (institutional investment) by providing a background and a summarization of existing studies on institutional investment in the Ghanaian context in relation to market efficiency.
• Indicate the market efficiencies and how each would support sound investment decision in Ghana.
• Detail the specific Market efficiency problems in Ghana.

Give an overview of the study structure

2. Literature Review this part should present:

• A classification and evaluation of what accredited scholars and researchers have written on institutional investment, market efficiency and how it promote sound investment decision in securities, particularly in the Ghanaian context.
• an overview, a summary, and an evaluation (critique) of the current state of knowledge about institutional investment, market efficiency, and investment in security decision making, particularly in the Ghanaian context .
• A discussion of methodological issues and suggestions for further study to improve the efficiency of the securities market in Ghana.

3. Analysis, discussion and expert advice/recommendation (s)

• The analysis must be based on current data (primary/secondary).
• Advise / recommendation (s) to improve the efficiency of the securities market in Ghana - must be based on findings after data analysis, carried out using analytical and logical reasoning to determine patterns, relationships or trends of institutional investment and market efficiency in Ghana