Efficient Market Hypothesis

Efficient market hypothesis states that

capital market is very much efficient.
It reflects all available information
instantaneously. In efficient capital
market investors can earn abnormal
return by manipulation of by utilizing
unknown information.
 1. Weak Form
Weak Form Hypothesis- Stock
Hypothesis Prices reflect all past
information about
the stocks.
Semi Strong Form 2. Semi Strong Form
Hypothesis Hypothesis-Stock
Prices reflect all
public available
Strong Form
information.
Hypothesis 3. Strong Form
Hypothesis-Stock
Prices reflect all
Efficient Capital Market insider information.
 Random Walk Theory
• The theory that stock price changes have the
common distribution and are independent of
each other, so the past movement or trend of a
stock price or market cannot be used to predict
its future movement.