Efficient Market Hypothesis

Explanation

EMH, formalized by Eugene Fama in 1970, comes in three forms: (1) Weak — prices reflect all past trading information (technical analysis can't work); (2) Semi-strong — prices reflect all public information (fundamental analysis can't work); (3) Strong — prices reflect all information, including insider knowledge. While strong-form EMH is clearly violated (insider trading is profitable), the debate over semi-strong efficiency continues. The existence of market anomalies (momentum, value, size effects) challenges EMH, but proponents argue these are compensation for risk, not inefficiency.

How Stoquity Uses This

Stoquity incorporates efficient market hypothesis analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.