Tuesday, 4 June 2013

What is the “efficient market theory”?

It’s a theory suggesting that all available information about a stock is known and factored into its price. Thus, an investor shouldn’t be able to find undervalued or overvalued stocks. There are strong and weak forms of the theory, and it’s not embraced by all. Many Fools tend to think that the market is generally efficient, but there are still occasional pockets of inefficiency that an alert investor can take advantage of.

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