Efficient Market Hypothesis
EMH says prices reflect available information so that you cannot systematically earn risk-adjusted profits from that information — a benchmark, not a religion.
Definition
Weak, semi-strong, and strong forms (Fama) differ by the information set. Efficiency is always relative to costs and risk. Anomalies can be risk, mispricing, or data mining.
Why it matters
It is why index funds exist and why every alpha claim needs a cost and a risk story. Completely efficient markets would not pay for research; completely inefficient ones would not stay that way.
Case
Post-earnings announcement drift and momentum survived decades of papers. Whether they are risk or inefficiency is the fight; that they were tradable after costs is the empirical claim.
How to read it
State the information set and the cost. ‘Markets are efficient’ is not an excuse to skip microstructure, and ‘markets are inefficient’ is not a strategy.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Efficient Capital MarketsFama · 1970 · Journal of FinanceThe survey that named the forms.