Efficient markets reflect all available information from "summary" of The Economics Book by DK
In a perfectly efficient market, all available information is already factored into the prices of assets. This means that investors cannot consistently achieve above-average returns by using publicly available information. The idea is that asset prices adjust rapidly to new information, making it impossible for anyone to consistently outperform the market. For example, let's say a company announces better-than-expected earnings. In an efficient market, this information would be quickly reflected in the stock price, making it difficult for investors to profit from this knowledge. This is because the stock price would already have adjusted to account for the positive earnings news. Efficient markets are based on the concept of the "random walk theory," which suggests that stock prices move randomly and independently of each other. This means that past price movements cannot be used to predict future price movements, as prices already r...
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