EMH
Business & Finance abbreviation · Stock Market & Investing
| Stands for | Efficient-market hypothesis |
|---|---|
| Categories | Business & Finance |
EMH stands for Efficient-market hypothesis, a stock market & investing abbreviation.
Theory that asset prices fully reflect all available information, so investors cannot consistently earn above-market returns except by taking extra risk or by luck. Its weak, semi-strong and strong forms differ in what information prices are assumed to reflect.
Example: If the EMH holds, paying active managers high fees to beat the index is mostly wasted money.
Usage notes
Eugene Fama formalized the hypothesis in a 1970 paper and shared the 2013 Nobel Prize in economics with Robert Shiller, whose research on excess volatility challenged it, and Lars Peter Hansen. The EMH underpins the case for passive index investing. Behavioral finance documents anomalies, such as momentum, that appear to contradict it.
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