In 1960, A Ph.D dissertation by Eugene Fama”Efficient Market Hypothesis”. It’s combination of three words, Efficient, Market and Hypothesis.

Efficient means well organized, Market means a place where buyers meet sellers and hypothesis is a supposition on the basis of limited evidence as a starting point for further investigation.

According to Efficient Market Hypothesis, there are three degree of EMH.

1. Strong form of EMH

2. Semi-Strong form of EMH

3. Weak from of EMH

The weak form of EMH assumes that current stock prices fully reflect all currently available security market information. It contends that past price and volume data have no relationship with the future direction of security prices. It concludes that excess returns cannot be achieved using technical analysis.

The semi-strong form of EMH assumes that current stock prices adjust rapidly to the release of all new public information. It contends that security prices have factored in available market and non-market public information. It concludes that excess returns cannot be achieved using fundamental analysis.

The strong form of EMH assumes that current stock prices fully reflect all public and private information. It contends that market, non-market and inside information is all factored into security prices and that no one has monopolistic access to relevant information. It assumes a perfect market and concludes that excess returns are impossible to achieve consistently.

INEFFICIENT MARKET

A theory which asserts that the market prices of common stocks and similar securities are not always accurately priced and tend to deviate from the true discounted value of their future cash flows. This theory opposes the efficient market hypothesis.

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