Market Efficiency
Financial Theory
Definition
Theory that financial markets incorporate all available information into prices quickly and accurately, making it difficult to consistently achieve returns above market averages through analysis or timing.
Key Points
- Prices reflect all available information
- Difficult to consistently beat market
- Supports passive investing approach
Examples
News quickly reflected in stock pricesIndex funds often outperform active fundsQuick Info
Category
Financial Theory
Related Topics
efficient market hypothesis
information flow
price discovery