Investor Glossary-efficient market theoryInvestor Glossary-efficient market theoryInvestor Glossary-efficient market theoryInvestor Glossary-efficient market theoryInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Efficient Market Theory

The HTML to link to this page
 

Developed by University of Chicago professor Eugen Fama in the 1960s, the efficient market theory states that, at any given time, all available information is fully reflected in securities' prices. The efficient market theory implies that no investor can consistently outperform the market since every stock is appropriately priced based on available information. The efficient market theory comes in three versions. In the strong form, the efficient market theory asserts that all information (including insider information) is incorporated in share prices. The semistrong version of the efficient market theory says that all publicly available information is reflected in share prices. The weak form of the efficient market theory asserts that past information is reflected in current share prices. Investors who accept the efficient market theory believe the portfolio manager's role is to tailor portfolios to specific investor needs, not outperforming the market. Subsequent studies have uncovered market anomolies inconsistent with the efficient market theory and resulted in the rejection of efficient market theory by most investors.



Rate this Efficient Market Theory definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: diluted share, phantom income, labor relations, liquidity ratio, APR, per diem, ex-dividend date, ex-dividend, inflation, FICO score, option premium, average price per share, cancelled check, VIX, deferred revenue, covered put, class C shares, quality assurance, irrevocable trust, command economy, in escrow, wholly-owned subsidiary, retained earnings, debt service coverage, balance sheet, real GDP, required rate of return, 1031 exchange, minority interest, dividends payable, EBITDA, deferred tax, risk management, Key Rate Duration, 144a, annual return, implied volatility, limit order, LIBOR, 1035 exchange, margin rate, stock split, open position, 401a, reverse mortgage, current ratio, Zero Cost Collar, FTSE, stock market close


Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
Investor Glossary Index >>> # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
©2004-2014 Investor Glossary - All rights reserved - Terms of Use