This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Kupiec, Driscoll and Blundell-Wignall and Browne. It surveys recent work, both theoretical and empirical, on the question of market efficiency in various asset markets. A number of studies of behaviour in the foreign exchange market, which provide evidence of departures from efficiency, are described. The paper summarises and discusses the implications of research on the effects of noise trading by "irrational" groups of agents, with particular reference to the stock market. The housing market is also considered as an example where pronounced price "bubbles" have appeared. The paper concludes with a discussion of the potential welfare impact of departures from efficiency in the foreign exchange market, where it is argued that the case for some form of intervention is strongest ...