Efficient Market Hypothesis (Emh)
| The Efficient Market Hypothesis (EMH) is an economic theory that suggests that any information about the price of an asset can be accessed in financial markets at any time. This means that prices of assets reflect all available information, and that it is impossible to beat the market because there is no way to predict which way prices will move in the future. The EMH is a controversial theory, and there is a lot of debate about whether or not it is true. Some people argue that markets are not always efficient, and that there are ways to beat the market. However, the vast majority of academic research supports the EMH. There are a few different types of efficiency that are often discussed in relation to the EMH. The first is called weak-form efficiency, which means that prices reflect all information that is publicly available. The second is called semi-strong-form efficiency, which suggests that prices also reflect all publicly available information, as well as all information that can be accessed through research. The third and most controversial type of efficiency is called strong-form efficiency, which suggests that prices reflect all information, both public and private. The EMH is an important theory for investors to understand, as it has implications for how they should approach investing. If the EMH is true, then it is not possible to beat the market, and the best way to achieve investment success is to simply invest in a diversified portfolio and hold it for the long term. However, if the EMH is not true, then there may be opportunities to beat the market by finding mispriced assets. |
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