Efficient-market hypothesis
Also known as: EMH · efficient markets · market efficiency · efficient markets hypothesis
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information.
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theoretical framework challenging the premise of profitable speculation
This hypothesis posits that asset prices reflect all available information, implying that consistent outperformance through speculation is impossible in an efficient market.
theoretical counterpoint to the existence of bubbles
This hypothesis argues that asset prices reflect all available information, implying that bubbles cannot exist in a perfectly efficient market.
theory challenging the practical utility of calculating intrinsic value
The efficient-market hypothesis argues that asset prices reflect all available information, implying that calculating intrinsic value cannot consistently yield superior returns.
theoretical counterpoint to herd behavior
The efficient-market hypothesis posits that asset prices reflect all available information, standing in direct opposition to the irrational, herd-driven market movements observed in reality.
Counter-theory to the concept of irrational exuberance
The efficient-market hypothesis argues that asset prices reflect all available information, directly contradicting the idea that market participants act with irrational, unfounded optimism.
theoretical framework for futures pricing
The hypothesis suggests that futures prices incorporate all available information, making it difficult for traders to consistently outperform the market.