The Efficient Market Hypothesis (EMH)

The Efficient Market Hypothesis (EMH) suggests that financial markets are highly efficient in processing information. This means all available information is quickly reflected in stock prices, making it impossible to consistently outperform the market through expert knowledge or analysis. In other words, because prices already incorporate all known data, the best strategy is often to invest in a broad market index rather than trying to pick individual stocks that will outperform. EMH emphasizes that markets tend to be fair, with prices that accurately represent a company's intrinsic value based on existing information.