Efficient Market Theory will be available on

Who is the market participant? Insofar as the market participant is unsophisticated about value analysis, financed with borrowed money, noncontrol, and lacks inside information, that participant will face a market tending strongly to instantaneous, EMH-like efficiency. Insofar as an investor is well trained, well informed, and not influenced by day-to-day or short-run price fluctuations, that investor avoids being influenced by an EMH-like efficiency.

The general theory of market efficiency

In other words, research findings cause the market to become more efficient.

Capital Market Theory after the Efficient Market Hypothesis.

Professor Martin Shubik to his everlasting credit has consistently stated that MCT, EMH, and EPT are not a general law, but really relatively narrow special cases. He has time and again postulated a general law describing
markets. I picked up on Shubik's pioneering views about markets when, in a January 31, 2005, letter to the shareholders of Third Avenue Value Fund, I wrote a piece, "The General Theory of Market Efficiency." Professor Shubik has long been and remains a director of Third Avenue. This essay represents what I've learned from Shubik's views about markets. I, for one, believe that this General Theory makes a most important contribution to economic theory and economic practice!

Efficient-market hypothesis - Wikipedia

Modern Capital Theory (MCT) was born in the 1960s as a description of how markets operate. MCT has been widely accepted as a general law by most financial economists. The basic tenets of MCT revolve around the Efficient Market Hypotheses (EMH) and Efficient Portfolio Theory (EPT).

The classic statements of the Efficient Markets Hypothesis (or EMH for short) are to be found in Roberts (1967) and Fama (1970).

The Fallibility of the Efficient Market Theory: A New …

For about ten years after publication of Fama's classic exposition in 1970, the Efficient Markets Hypothesis dominated the academic and business scene. A steady stream of studies and articles, both theoretical and empirical in approach, almost unanimously tended to back up the findings of EMH. As Jensen (1978) wrote: ‘There is no other proposition in economics which has more solid empirical evidence supporting it than the EMH.’

This is embodied in the Efficient Market Hypothesis.

If a market is strong-form efficient, the current market price is the best available unbiased predictor of a fair price, having regard to all relevant information, whether the information is in the public domain or not. As we have seen, this implies that excess returns cannot consistently be achieved even by trading on inside information. This does prompt the interesting observation that must be the first to trade on the inside information and hence make an excess return. Attractive as this line of reasoning may be in theory, it is unfortunately well-nigh impossible to test it in practice with any degree of academic rigour.

Efficient market theory is not fully applicable even to shares

For the past 40 years, financial academics have operated mostly on the assumption that financial markets are highly efficient. In a highly efficient market, the price of a common stock multiplied by the amount of shares outstanding reflects the underlying equity value of the company issuing that common stock. This is embodied in the Efficient Market Hypothesis. Recently, behaviorists have challenged EMH based on the theory that investors sometimes make emotional, irrational, and stupid decisions. But even behaviorists seem to concede that if investors were rational, financial markets would be highly efficient. I disagree. Certain markets always will be inefficient versus EMH standards of efficiency. The raison d'etre of the Third Avenue Value Fund is to take advantage of the absence of instantaneous efficiencies in the majority of markets in existence.

Efficient market hypothesis in ..

Some markets are inherently inefficient. Or to put it in another context, an "efficient" market in these situations means that certain market participants are virtually assured of earning very substantial excess returns on a relatively continual basis.

The efficient market hypothesis ..

Before delving into the subject of market efficiency, it is important to define what a market is: A market is any financial or commercial arena where participants reach agreement as to price, and other terms, which each participant believes is the best reasonably achievable under the circumstances.