Efficient Market Hypothesis Test

The Efficient Market Hypothesis (EMH) test evaluates whether stock prices accurately reflect all available information. If markets are efficient, then prices quickly incorporate news and data, making it impossible to consistently outperform the market through analysis or prediction. Testing EMH involves analyzing historical stock returns, market anomalies, and other factors to see if any predictable patterns exist. If such patterns are found and can be exploited for profit, the market may be less efficient than assumed. Essentially, EMH tests aim to determine whether current prices truly represent all known information or if opportunities for gains still remain.