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What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?

What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?
Transcribed Image Text:What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?
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