efficiency market hypothesis

The Efficient Market Hypothesis (EMH) suggests that financial markets are knowledgeable and quickly incorporate all available information into asset prices. This means that it's very difficult for investors to consistently outperform the market because any new, relevant information is immediately reflected in stock prices. In essence, stocks are usually fairly valued at any given moment, making it challenging to find undervalued or overvalued assets through analysis or timing. EMH emphasizes that trying to beat the market consistently is unlikely to succeed, encouraging a passive investment approach like index funds.