Efficient Market Hypothesis

The Efficient Market Hypothesis argues that current stock prices reflect all existing available information, making them fairly valued as they are presently.
Given these assumptions, outperforming the market by stock picking or market timing is highly unlikely.

Efficient Market Hypothesis

The most important assumption underlying the efficient market hypothesis is that all information relevant to stock or any other asset prices are freely available and shared with all market participants.

Given the vast numbers of buyers and sellers in the market, information and data is incorporated quickly, and price movements reflect this.
As a result, the theory argues that stocks always trade at their fair market value.

An investor following the efficient market hypothesis shouldn’t buy undervalued stocks at bargain basement prices expecting to see large gains in the future, nor would they benefit from selling overvalued stocks.

Three Variations

1. The Weak Form of the Efficient Market Hypothesis
Although investors abiding by the efficient market hypothesis believe that security prices reflect all available public market information, those following the weak form of the hypothesis assume that prices might not reflect new information that hasn’t yet been made available to the public.

2. The Semi-Strong Form of the Efficient Market Hypothesis
This form takes the same assertions of weak form, and includes the assumption that all new public information is instantly priced into the market.
In this way, neither fundamental nor technical analysis can be used to generate excess returns.

3. The Strong Form of the Efficient Market Hypothesis
Strong form efficient market hypothesis followers believe that all information, both public and private, is incorporated into a security’s current price. In this way, not even insider information can give investors an opportunity for excess returns.

Arguments Around the Efficient Market Hypothesis

Investors who follow the efficient market hypothesis tend to stick with passive investing options, like index funds and exchange-traded funds (ETFs) that track benchmark indexes, for the reasons listed above.
Given the variety of investing strategies people deploy, it’s clear that not everyone believes the efficient market hypothesis to be a solid blueprint for smart investing.

The efficiency of Active Investing

There is evidence to support both sides of the argument.
The Morningstar Active vs Passive Barometer is a twice-yearly report that measures the performance of active managers against their passive peers.

Nearly 3,500 funds were included in the 2020 analysis, which found that only 49% of actively managed funds outperformed their passive counterparts for the year.

On the other hand, looking at the 10-year period ending December 31, 2020 shows a different picture, since the percentage of active managers who outperformed comparable passive strategies dropped to 23%.

Still there are no clear answer reagarding that there are some hideden and priavate trading data and the results were not same case-by-case.
And we know some very succesful cases like Warren Buffet and other hedge funds.
Important thing is to keep very basic.
It may be required to refine your trading skills, should get used to that and very easily and flexibly should apply anytime and anywhere.
It is also required to see the flow of money that may influence markets. If you are are very skillful traders or investors, there are some key indexs you can find for your investment asset.
Psychological approach would be required to be better investor.

Source: Fobes