The Efficient Market Hypothesis (EMH)
As per this cornerstone theory in Financial Economics, stock markets are inherently efficient. In other words, all possible news regarding a particular security (stock) is already factored into the stock price, making it impossible to "beat the market." So, as per the EMH, since all relevant information regarding a stock is already factored into the stock price, the price can change only when "new" information regarding the stock / underlying company is made available. Depending on whether this new news is good or bad, the stock will either go up or down.
So, to beat the market, an investor must look into "new information" not already available widely in the marketplace. Seeking this "new information" is the holy grail of intelligent investors; who sometimes get into trouble, as in the case of Martha Stewart, who had to go to jail for possessing "insider information" regarding some stock that she bought... for trading on the basis of "insider information" is currently illegal (as per Rule 10b-5 of the Security Exchange Act of 1934)...since it violates the spirit of the EMH, that markets should be efficient... and no particular investor should have an inherent advantage...
As per the "Strong-form" version of the EMH, even insider information is factored into the stock prices. However, the fact that trading based on "insider information" lands people in trouble, including jail time, proves that that the "Strong-form" version of the EMH exists only in theory. Please look into the Wikipedia Article for details on the Weak, the Semi-strong, and the Strong forms of the EMH.
An outcome of the EMH is CAPM, or Capital Asset Pricing Model.
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