Question

What is the efficient market theory and what are the misconceptions related to it?

Answer 1

The efficient-market hypothesis (EMH) is a theory in financial economics that states that asset prices fully reflect all available information. 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.

Answer 2

Explanation:

1. There are three forms of EMH: weak, semi-strong, and strong1. Here's what each says about the market. Weak Form EMH: Suggests that all past information is priced into securities.