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MENTAL MODEL · M10341

Efficient Market Hypothesis, EMH

Efficient Market Hypothesis, EMH
BusinessHigh supportEconomics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

Fama proposed that asset prices fully reflect all available information, making it difficult to consistently achieve excess returns; prices only fluctuate randomly in response to new information.

SCAFFOLDING EFFECT

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The Efficient Market Hypothesis (EMH), an economic theory deepened and proposed by Eugene Fama in 1970, is one of the seven most important concepts in investment theory. It defines an efficient market as one where prices fully reflect all available information. Indicators of market efficiency include whether prices move freely based on information and whether information is evenly distributed so that all investors receive the same quality of information. According to this hypothesis, investors quickly and effectively use available information when buying and selling stocks. All known factors affecting a stock's price are already reflected in its price, so technical analysis is considered ineffective under this theory. It can also be understood as a market with a good regulatory system, market makers, and mature...

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EMH: Asset prices fully reflect all available information, so it is impossible to consistently achieve excess returns through public information. The mechanism is that arbitrage causes prices to quickly revert to 'fair value'.

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Source support: Explicit

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    zh.wikipedia.orghttps://zh.wikipedia.org/wiki/%E6%95%88%E7%8E%87%E5%B8%82%E5%A0%B4%E5%81%87%E8%AA%AAZH · Explicit
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