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.
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References in periodicals archive ?
When a foreign exchange market is strong form efficiency it reflects both information contained in past exchange rates and publicly available information.
Efficiency of foreign exchange market of Sri Lanka: some empirical evidence
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.
Efficient market hypothesis: the case of India's equity market
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.
Testing weak-form efficiency of emerging economies: a critical review of literature/Kritine kylancios ekonomikos mazo rinkos efektyvumo literaturos apzvalga
Research on company insiders would provide further conclusive proof of strong form efficiency or otherwise.
Empirical testing of strong form of market efficiency
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).
Can trading on federal funds rate change announcements produce above normal stock market returns?: A test of market efficiency
Weak form efficiency implies that returns will be negative across all odds categories, while strong form efficiency says that returns will be identical (equal to -t) across all odds categories.
Racetrack wagering and the "uninformed" bettor: a study of market efficiency
Strong form efficiency would seem not to be supported by the data in Figures 1-4.
Testing for efficiency in lotto markets

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