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Efficient Market Hypothesis and stock markets

Does the Efficient Market Hypothesis do an adequate job of explaining how the stock market functions? Please explain your answer in detail.

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Yes, the efficient market hypothesis does provide a sound understanding of the functioning of the stock markets. The basic premises of EMH is that the current prices of stocks reflect all publicly available information and hence, they are fairly priced and it is not possible for investors to earn excess profits by using this information. EMH states that stock price adjust themselves quickly to the continuous arrival of new information about the stock and it is impossible for an investor to earn higher profits by ...

Solution Summary

Whether the Efficient Market Hypothesis do an adequate job of explaining how the stock market functions is determined. The expert explain their answer in detail.

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