efficient markets hypothesis
- efficient markets hypothesis
- EMH
The theory that abnormal profit cannot be made by investing in Securities in a *market in which information is shared by all participants. There are three forms of efficient markets:
(i) a strong form, in which the prices of Securities fully reflect all available information (as all information is known publicly);
(ii) a semi-strong form, in which the value of a security reflects all publicly held information, but there may be some privately held information which is withheld and which can lead to investors making abnormal profits; and
(iii) a weak form, in which the use of secret information makes movements in the prices of securities difficult to estimate. The existence of profits through *arbitrage and *speculation suggests that the strong form of market exists only rarely - if at all - in practice.
Auditor's dictionary.
2014.
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