Following are some of the factors that affect the degree of efficiencies in the market:
a. Market Participants. The more the number of market participants more is the more efficient the market. A fewer number of participants signifies a less efficient market.
b. Availability of Information. The wider the availability of information, the more efficient it is considered and vice-a-versa.
c. Financial Disclosures. The efficient markets have more disclosure and standardized ones in comparison to the inefficient markets, which have fewer disclosures and variable reporting standards.
d. Limits to Trading. In efficient markets, there are lesser limits and restrictions which increase the speed of the transactions and their transparency. However, in inefficient markets, there are more restrictions leading to lesser transparency and slower/lagged transactions.
e. Transaction and Information Cost. The difference in transaction costs etc. results in the mispricing of securities in the two markets. However, they should still be considered efficient, if it is within the range of arbitrage. For the information and acquisition cost, for the market to be efficient, the return reduced by the information cost should equal the risk assumed.