Efficient Market Hypothesis
Prices as information processors, weak, semi-strong, and strong forms, and the anomalies.
Definition
The hypothesis that asset prices already reflect available information, weak form (past prices), semi-strong (public info), strong (everything, even inside info).
Key equation
P_t = E[PV of fundamentals | information]; returns unpredictable: E[r_{t+1} | info_t] = required return
The intuition
If everyone knows the stock will rise tomorrow, it rises today, predictability self-destructs through trading. The punchline isn't that prices are 'right', it's that beating the market requires information others lack, which is why index funds win after fees.
Exam tip
Anomalies (momentum, value) vs adaptive/behavioral rebuttals is the standard essay pivot, know one example each way.
Want this one as a full interactive graph? Votes decide the build order, and an email means we can tell you when it ships.