Strong form of the EMT

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Strong form of the EMT

Theory that market prices reflect all relevant publicly and privately available information. Defined by Eugene F. Fama in 1970.

Strong Form of the EMT

The most controversial form of the efficient markets theory on how markets work. It holds that the market efficiently deals with all information on a given security and reflects it in the price immediately. Even insider information is immediately reflected in security prices. Therefore, the model holds that technical analysis, fundamental analysis, and any speculative investing based on them are useless. Investors and academics disagree on how well the model works. See also: Weak form of the EMT, Semi-strong form of the EMT.
References in periodicals archive ?
Under strong form efficiency, all information even apparent company secrets--is incorporated in security prices and thus, no investor can earn excess profit by trading on public or non-public information.
Wong and Kwong (1984) suggest that if the evidence fails to support weak-form efficiency, it is unnecessary to test the semi-strong form or strong form efficiency at the stricter levels.
Research on company insiders would provide further conclusive proof of strong form efficiency or otherwise.
Studies on the validity of strong form efficiency offer mixed results (Jaffe, 1974; Finnerty, 1976; Givoly and Palmon, 1985; Friend, Blume, and Crockett, 1970; Jensen, 1968).