Theory of efficient markets

The Efficient Market Hypothesis (EMH) suggests that financial markets quickly incorporate all available information into asset prices. This means it’s very difficult to consistently outperform the market through stock picking or timing, because any new information is rapidly reflected in prices. Essentially, stocks trade at their fair value, making it hard for investors to gain an advantage unless they have access to privileged information. EMH relies on the idea that markets are highly efficient, constantly adjusting to new data, which promotes transparency and liquidity but challenges the idea of consistently beating the market through active management.