All the three form of EMH suggests that nobody can systematically beat the market ‘consistently’. Hence all information historical, public or private is useless in predicting the future values and there is no way to consistently beat the market. This is because all current and relevant information is already reflected in the share price. This is possible only when the market is able to quickly and accurately reflect the expectations of investors in share prices, this is known as market efficiency. In semi strong form of efficient market no return is earned above average. Semi-strong-form efficiency 3. All rights reserved. Hence, the amount paid for a stock or security and the return when discounted based on the amount of risk it involves will give a Net Present Value equal to Zero (NPV = 0), i.e. The Efficient Market Theory states that fluctuations in price of a share are random and do not follow a regular pattern. I'm SHOCKED how easy.. No wonder others goin crazy sharing this??? According to efficient market hypothesis, there are three forms of marketefficiency including the following: 1. Speculative economic bubbles are an obvious anomaly, in that the market often appears to be driven by buyers operating on irrational exuberance, who take little notice of underlying value. It can be of two types: Operational Efficiency and Informational Efficiency. In such a market informational traders can earn huge profits in a short run while liquidity traders with naïve buy and hold policy will incur losses. The American economist Eugene Fama is… • Informational Traders – Traders who buy or sell shares on the basis on thorough research and analysis of the market are informational traders. Rational investors have difficulty profiting by shorting irrational bubbles because, as John Maynard Keynes commented, "markets can remain irrational far longer than you or I can remain solvent. " Sudde… The current prices of the security reflect all security market. The implication here would be that even if you have some inside information and could legally trade based upon it, you would gain nothing by doing so.The way I see it, strong-form EMH isn’t terribly relevant to most individual investors, as it’s not too often that we have information not available to the institutional investors. The Efficient Markets Hypothesis
The Efficient Markets Hypothesis (EMH) is made up of three progressively stronger forms:
Weak Form

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