gen-state-the-efficient-market-hypothesis-precisely-and-explain-ba8e

State the efficient market hypothesis precisely and explain why it matters in 2-3 sentences.

# Efficient Market Hypothesis **Precise Statement:** The Efficient Market Hypothesis (EMH) states that asset prices fully reflect all available information at any given time, making it impossible to consistently achieve returns above average market returns on a risk-adjusted basis through expert stock selection or market timing. **Why It Matters:** If markets are efficient, active fund management and stock-picking strategies are largely futile, suggesting investors should use low-cost index funds instead. The hypothesis also implies that price movements are unpredictable (follow a "random walk"), fundamentally shaping how we think about investing, market regulation, and whether financial markets allocate capital optimally.