Market efficiency

Market efficiency refers to the degree to which market prices reflect all available, relevant information. If markets are efficient, then all information is already incorporated into prices, and so there is no way to “beat” the market because there are no undervalued or overvalued securities available. Market efficiency was developed in 1970 by economist Eugene Fama, whose efficient market hypothesis (EMH) states that an investor can’t outperform the market, and that market anomalies should not exist because they will immediately be arbitraged away. Fama later won the Nobel Prize for his efforts. Investors who agree with this theory tend to buy index funds that track overall market performance and are proponents of passive portfolio management—Read more at Investopedia. Chappelow, Jim. “Market Efficiency.” 29 August 2019