Strong-form efficiency

Strong-form efficiency

A form of pricing efficiency, that posits that the price of a security reflects all information, whether or not it is publicly available. Related: Weak-form efficiency, semi-strong form efficiency.

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 ?
Strong-form efficiency theory suggests that no investor can earn an above economic return from using any information, public or private.
Finally, in the fifth section strong-form efficiency is evaluated using these same games and applying the concept of a rational expectations equilibrium.
We now turn our attention to strong-form efficiency, which involves more sophisticated bettor behavior: the ability to forecast the expected value of a lotto ticket given the information available to them.
A simple comparison of expected value with one minus the takeout rate thus does not constitute a meaningful test of strong-form efficiency.
Since a direct test of strong-form efficiency is not possible, we propose the following test of market efficiency instead.