Meaning Of Efficient Market Theory

The efficient market hypothesis emh is an investment theory launched by eugene fama which holds that investors who buy securities at efficient prices should be provided with accurate information and should receive a rate of return that implicitly includes the perceived risk of the security.

Meaning of efficient market theory. A direct implication is that it is impossible to beat the market consistently on a risk adjusted basis since market prices should only react to new information. The model holds that technical analysis fundamental analysis and any speculative investing based on them are useless. The aspirin count theory is a lagging indicator and actually hasn t been formally.

It states that the market efficiently deals with all information on a given security and reflects it in the price immediately. A market theory that states stock prices and aspirin production are inversely related.