efficient market hypothesis

Popular Terms
Early 1990's capital market theory that it is impossible to earn abnormal capital gains or profit on the basis of the market information. It states that the price of a financial instrument (bond, share, etc.) reflects all the information currently available and, if the price is rumored to increase in the near future, investors or traders will buy the instrument now thus driving its price up and negating the anticipated increase. And that it is impossible to predict movement of prices with any degree of certainty because prices follow a random walk and therefore, on average, no one is likely to beat the market.
The critics of this theory point out that only a few individuals are as rational as it presumes them to be, and that information gathering is expensive and tedious enough to make it unlikely to be reflected in the prices. Basis of the capital asset pricing model (CAPM), it was developed by Professor Eugene Fama (born 1939) of the University of Chicago in early 1960s, it has been superseded by the coherent market hypothesis (CMH).

Use 'efficient market hypothesis' in a Sentence

I did not agree with the efficient market hypothesis, because I never believed in a theory, until I tried something and found out for myself.
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You need to be able to figure out how an efficient market hypothesis could help you to expand your product in new areas,.
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You can try and come up with a good efficient market hypothesis so that you can have new ideas on how to do business.
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