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
Efficient Market Hypothesis refers to adjusted profits from that information — a benchmark, not a religion. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
It shows up in factor research, attribution, and capacity debates — whether a return slice is skill, style, or fee drag. When adjusted profits from that information — a benchmark, not a religion shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what efficient market hypothesis is saying. If adjusted profits from that information — a benchmark, not a religion moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Check definition stability across universes, costs, and regimes before treating a backtest as portable. Prefer a short written null hypothesis for Efficient Market Hypothesis: what would falsify the current reading in the next window?
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