Science Fair Project Encyclopedia
Efficient market theory
This theory / hypothesis suggests that market prices react rather rationally and instantly to all known information, so that prices fit
- known economic fundamentals,
- a rational estimate of future prospects,
- risk-related economic utility.
The EMT is put somewhat in check by market anomalies (mispricings, anomalous returns or volatilities...). Those anomalies are due either to technical imperfections or to behavioral biases. See behavioral finance
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