New Delhi, Aug. 9 -- Investors may find it increasingly important to distinguish between periods when markets efficiently incorporate information and episodes when collective behaviour amplifies mistakes, according to a research report by Morgan Stanley.

While consistently generating excess returns remains difficult, extreme sentiment, sharp price moves and elevated valuations could provide signals that the market's "wisdom" is giving way to the "madness" of crowds, the brokerage noted.

The broking further said that markets generally do a good job of aggregating dispersed information through the interaction of buyers and sellers. This makes prices difficult to beat consistently, as investors seeking an edge must identify information tha...