What Is Market Efficiency?
When money is put into the stock market, it is done to generate a return on the capital invested. Many investors try not only to make a profitable return but also to outperform or beat the market.
Efficient market hypothesis at any given time, prices fully reflect all available information on a market. Thus, no investor has a benefit in predicting a return on a stock price since no one has access to information not already available to everyone else. In an efficient market buying and selling securities in an attempt to outperform the market will effectively be a game of chance rather than skill.
According to Fama, Efficient market is a market which adjusts rapidly to new information. It is a market in which prices fully reflect available information. (Fama, 1969)
If the market is efficient, news about the stock should be reflected immediately in the price.
The EMH is associated with the idea of a "random walk," which implies that the next move......
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