Question 1
An investor who has held listed shares for many years is considering direct property, and asks his agent to set out plainly how the two markets differ in the way information reaches participants and in where transactions take place.
Consider the following statements.
- (i) The share market has a central trading place; the property market does not.
- (ii) Information in the share market approaches completeness; in the property market it does not.
- (iii) The property market is efficient and perfectly competitive.
- (iv) The absence of a central place is one reason property information is imperfect.
Show the answer and full explanation
Answer: A
The rule. The share market has a central trading place and near-complete information; the property market has neither, and the absence of a central marketplace is one reason its information is imperfect. The property market is accordingly not efficient or perfectly competitive.
Why A is correct. (i), (ii) and (iv) are correct. (iii) is false — the property market is neither efficient nor perfectly competitive.
The other options.
- B takes all four including the false (iii).
- C carries (iii) and drops the correct (i).
- D pairs the correct (i) with the false (iii).
Exam note. Statement (iv) explains the link between (i) and (ii) — dispersed dealing is why information is incomplete. Recognising the causal chain confirms all three belong together.
The property market is accordingly not efficient or perfectly competitive →