Efficient Market Hypothesis: Definition, Criticism

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  • The efficient market hypothesis (EMH) says that all information is priced into securities at any given time.
  • Proponents believe that since stocks are always fairly valued, active investing strategies cannot beat the market.
  • Critics counter by pointing to investors such as Warren Buffett and George Soros, who can and do outperform the market.
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The efficient market hypothesis (EMH) holds that stocks are always fairly valued because their prices reflect all the information available. Therefore, proponents argue, there’s no way for an individual to meaningfully increase their returns relative to the…

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