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Quote from Professor Fama:
"An
'efficient' market is defined as a market where there
are large numbers of rational, profit-maximizers
actively competing, with each trying to predict future
market values of individual securities, and where
important current information is almost freely available
to all participants. In an efficient market, competition
among the many intelligent participants leads to a
situation where, at any point in time, actual prices of
individual securities already reflect the effects of
information based both on events that have already
occurred and on events which, as of now, the market
expects to take place in the future. In other words, in
an efficient market at any point in time the actual
price of a security will be a good estimate of its
intrinsic value."
Eugene
F. Fama, "Random Walks in Stock Market Prices"
Financial Analysts Journal, September/October 1965
(reprinted January-February 1995) |
