Efficient Market Hypothesis (EMH) 效率市場假說 EMH
Released已發布Apply the Efficient Market Hypothesis (Fama, 1970) to evaluate information incorporation in asset prices across weak, semi-strong, and strong forms. Use this skill when the user needs to assess market efficiency, determine if a trading strategy can generate abnormal returns, evaluate event studies, or when they ask 'can technical analysis work', 'does the market already know this', or 'is this anomaly exploitable'.
學術研究技能：Efficient Market Hypothesis (EMH) 分析與應用。
Overview概述
The Efficient Market Hypothesis (Fama, 1970) posits that asset prices fully reflect available information, making it impossible to consistently earn abnormal returns. EMH is organized into three forms — weak, semi-strong, and strong — each defined by the information set reflected in prices.
When to Use使用時機
- Evaluating whether a trading strategy exploits genuine inefficiency
- Designing event studies (semi-strong form test)
- Assessing if active management adds value over passive indexing
- Debating the validity of technical or fundamental analysis
When NOT to Use不適用時機
- As justification to ignore all market anomalies without investigation
- When markets are clearly illiquid or informationally segmented
- For normative claims — EMH describes price behavior, not what prices "should" be
Assumptions前提假設
IRON LAW: In an efficient market, prices reflect available information —
beating the market consistently requires either superior information
or accepting more risk. No free lunch.
Key assumptions:
- Large number of rational, profit-maximizing participants
- Information is costless and available simultaneously to all participants
- Transaction costs do not prevent trading on information
- Investors react quickly and unbiasedly to new information
Framework 框架
Step 1 — Identify the Information Set
- Weak form: past prices and trading volume only
- Semi-strong form: all publicly available information
- Strong form: all information including private/insider information
Step 2 — Determine the Testable Implication
| Form | Information Reflected | Implication |
|---|---|---|
| Weak | Historical prices | Technical analysis cannot earn excess returns |
| Semi-strong | All public info | Fundamental analysis cannot earn excess returns |
| Strong | All info (public + private) | Even insiders cannot earn excess returns |
Step 3 — Select Appropriate Test
- Weak: autocorrelation tests, runs tests, filter rules
- Semi-strong: event studies (abnormal returns around announcements)
- Strong: insider trading profitability studies
Step 4 — Interpret Results with Joint-Hypothesis Awareness
Any test of efficiency is simultaneously a test of the asset pricing model used to define "abnormal" return.
Output Format輸出格式
Gotchas注意事項
- Joint-hypothesis problem: you cannot test efficiency without assuming an equilibrium model
- Grossman-Stiglitz paradox (1980): if markets are perfectly efficient, no one has incentive to gather information
- Anomalies (momentum, value, size) persist but may reflect risk or data mining
- EMH does not claim prices are always "correct" — only that mispricings are not systematically exploitable
- Market efficiency varies by market segment; large-cap equities are more efficient than micro-caps
- Behavioral finance provides systematic counterexamples but does not necessarily invalidate EMH
References參考資料
- Fama, E. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25(2), 383-417.
- Grossman, S. & Stiglitz, J. (1980). On the impossibility of informationally efficient markets. American Economic Review, 70(3), 393-408.
- Malkiel, B. (2003). The efficient market hypothesis and its critics. Journal of Economic Perspectives, 17(1), 59-82.