Definitions for "Efficient market theory"
The (now discredited) theory that all market participants receive and act on all of the relevant information available as soon as it becomes available; if true, no investment strategy would be better than a coin toss. see also random walk theory.
Proponents of the efficient market theory believe that a share's current price accurately reflects what investors know about the share, and further that you can't predict a share's future price based on its past performance. Their conclusion, which is contested by other experts, is that it's not possible for an individual or institutional investor to outperform the market as a whole. Index funds, which are designed to match, rather than beat, the performance of a particular market segment, are in part an outgrowth of efficient market theory.
A theory that accepts the notion of an already efficient market and that efforts to beat the market are futile.