Efficient Market Theory

Efficient Market Theory is the theory which claims that given full access to all information the market's current pricing of a share is the best estimate of future returns from that share.

A market is reckoned to be more efficient the more quickly share prices respond to information. The theory is part of the Random Walk Theory of share price movements, which says that future price movements are independent of past changes - that is to say, you cannot forecast the future from past performance.

This approach contradicts the work of chartists .

See Also: Online share dealing service Stockmarket Centre

Last Updated: May 2007 © Moneyextra.com

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