Efficient Market Hypothesis for FINRA/NASAA 📈

The efficient market hypothesis (EMH) or theory states that share prices reflect all the information available.

According to the EMH, stocks trade at their fair market value on exchanges.
Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio.
Opponents of EMH believe that it is possible to beat the market and that stocks can deviate from their fair market values.

Accepting the EMH in its purest (strong) form may be difficult as it states that all information in a market, whether public or private, is accounted for in a stock's price. However, modifications of EMH exist to reflect the degree to which it can be applied to markets:

Semi-strong efficiency: This form of EMH implies all public (but not non-public) information is calculated into a stock's current share price. Neither fundamental nor technical analysis can be used to achieve superior gains.

Weak efficiency: This type of EMH claims that all past prices of a stock are reflected in today's stock price. Therefore, technical analysis cannot be used to predict and beat the market.