Other concepts include functional/operational efficiency, which is inversely related to the costs that investors bear for making transactions, and allocative efficiency, which is a measure of how far a market channels funds from ultimate lenders to ultimate borrowers in such a way that the funds are used in the most productive manner.
Fundamental valuation efficiency Asset prices reflect the expected flows of payments associated with holding the assets (profit forecasts are correct, they attract investors) Fundamental valuation involves lower risks and less profit opportunities.
Financial markets are characterized by predictability and inconsistent misalignments that force the prices to always deviate from their fundamental valuations.
Full insurance efficiency This ensures the continuous delivery of goods and services in all contingencies.
Functional/Operational efficiency The products and services available at the financial markets are provided for the least cost and are directly useful to the participants.
In the 1970s Eugene Fama defined an efficient financial market as "one in which prices always fully reflect available information".
Therefore, identifying trends or patterns of price changes in a market can't be used to predict the future value of financial instruments.