Efficient Market Hypothesis

About Efficient Market Hypothesis

The Efficient Market Hypothesis, developed by Eugene Fama in 1970, argues that stock prices fully reflect all available information. In strong form, no one can consistently beat the market. EMH became the dominant academic theory of markets. It provided the theoretical foundation for index investing. Critics pointed to bubbles, crashes, and behavioral biases as evidence against EMH. The 2008 crisis was particularly damaging to EMH credibility. Fama received the Nobel Prize in 2013, shared with behavioral finance pioneer Robert Shiller, an intellectual opponent. The debate between efficient markets and behavioral finance remains central to finance theory. Most practitioners accept that markets are mostly efficient but not perfectly so.