the efficent market hypothesis suggests?

Question

that equity share prices reflect all information that is knowable and relevent, thus rendering all forms of investment analysis and research worthless.
discuss the validity of the above statement with reference to technical analysis and fundamental analysis.
thank you

Answer 1

If markets are efficient, then it is precisely because of investment analysis and research. However, in a perfectly efficient market, that investment would add no value beyond the value received by everyone else. In other words, if everyone, on average, did the same analysis, then no one is better off, on average or to use more precise language "in expectation."

By bringing technical and fundamental analysis into the question you are also bringing time horizons into the question. Technical analysis presumes that markets are temporarily inefficient. In a perfectly efficient market, where the efficient equilibrium point is at 'a,' prior to the release of information and at 'b,' following the release of information, then technical analysis implies that markets cannot instantly adjust the price from a to b and a profit is to be made from the transition. If this is the case, fundamental analysis should also provide the observation that excess profits are available in the transition as well. In this case, both forms of analysis provide excess value to the parties that find this information first. Once it reaches point b, then no one can win from information, because everyone shares it. In this case, once at b, information has become a public good. Until then, it acts like a private good because not everyone is fully aware it exists.

Answer 2

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Answer 3

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