Efficient Market Hypothesis
by The Hypothesis of Efficient Market.
The concept of efficient market hypothesis was introduced by Eugene. F. Fama in 1970s. The efficient market is defined as “the market where there is a large number of rational profit maximize activity competing with each other, where investors try to predict future values, and where important information is available to all the participants.” It means that information about a security is reflected in its stocks price fluctuation. The market is considered to be more efficient as quickly it is adjusted to the new information. So it is cleared that generating profit on the basis of past information is not possible. So there is a no prediction for the future prices done on the basis of available past information. The market is said to be more efficient if the prices are unpredictable and random. This is known as random walk model or random walk hypothesis.
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