Review:
Efficient Market Hypothesis (emh)
overall review score: 4.5
⭐⭐⭐⭐⭐
score is between 0 and 5
The efficient market hypothesis (EMH) is a theory in financial economics that states that asset prices fully reflect all available information. In other words, it suggests that it is impossible to consistently beat the market because stock prices already incorporate and reflect all relevant information.
Key Features
- Asset prices reflect all available information
- It is impossible to consistently beat the market
- Three forms: weak, semi-strong, and strong
Pros
- Provides a useful framework for understanding financial markets
- Encourages investors to invest in diversified portfolios rather than trying to time the market
Cons
- Critics argue that markets are not always efficient and there are opportunities for investors to outperform the market through analysis and research