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Efficient market theory |
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Efficient market theory. Proponents of the efficient market theory believe that a stock's current price accurately reflects what investors know about the stock. They also maintain that you can't predict a stock's future price based on its past performance. Their conclusion, which is contested by other experts, is that it's not possible for an individual or institutional investor to outperform the market as a whole. Index funds, which are designed to match, rather than beat, the performance of a particular market segment, are in part an outgrowth of efficient market theory. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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According to efficient market theory, it's nearly impossible to outperform securities markets over time, whether it's with one class of assets or many. Here Kuttner seems ignorant of the central concept that stock prices reflect available information at a point in time and change with new information; he seems to think the Efficient Market Theory argues that stock prices are "accurate. According to the popular Efficient Market Theory, stock price variations are random and, as such, are not predictable. |
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