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.
is the hypothesis that market prices reflect the knowledge and expectations of all investors. Within this theory, investors who adhere to it believe it to be highly improbable that market movement can be predicted, i.e., using darts to chose stocks are just as effective as stock or market analysis.
All known information is already discounted by the market and reflected in the price due to market participants acting upon the information.
the principle that a large market with free access to relevant data will efficiently incorporate that data into the prices of all securities. It asserts that any new development is instantaneously priced into a security, thus making it impossible to consistently beat the market.
In the 1980s academics tested the theories of chartists (see above) that past price action could be used to predict future prices. They concluded that it didn't work because stockmarkets were 'efficient'. By this they meant that the current price was always the right price because it reflected all the known information; prices changed in reaction to new information, which nobody could predict in advance. Taken as gospel for a while in the 1970s and 1980s, the theory has recently met both pragmatic and academic challenges.
"EMT" is the theory postulating that market prices reflect the knowledge and expectations of all investors. It asserts that any new development is instantaneously priced into a security, thus making it impossible to beat the market consistently.
Philosophy that it is useless to conduct market analyses as all investors' knowledge and expectations are already reflected in the market and the stock's price. Thus, it is not feasible to outperform the market. The theory also suggests that if investors randomly select stocks from a newspaper's stock listings, they would have as good a chance of outperforming the market as any professional investor. See: Inefficiency In The Market
A theory stating that stock prices perfectly reflect all market information that is known by all investors. The theory also states that no investor can beat the market's returns through skill because it is impossible to determine future stock prices, and that luck explains why some investors beat the market. The theory is much debated.
The efficient market theory asserts that market prices reflect the knowledge and expectations of all investors. Therefore, the theory holds that an investor should not expect to earn an above market return. However, it fails to adequately explain how some investors have consistently beaten the market over long time periods.
The hypothesis that all relevant and material information is fully and immediately reflected in a share price, and hence it is not possible for any investor to make abnormal profits by studying those facts.