Stated simply, the Efficient Markets Hypothesis, or EMH, is this: Anything you know, the market already knows. So the EMH says that you canâ??t make money in financial markets by trading based on information. If you discover that a company is going to make more profit, you canâ??t make money by buying its stock. If you find some pattern in past stock prices, it will disappear before you can make money exploiting it. This might sound like an odd definition of â??efficiency,â? but what it means is that financial markets are very good at assimilating information.
It has become very fashionable to ridicule and dismiss the EMH.
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