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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A component of the theory of efficient markets that holds that security prices fully incorporate all public and most private information relevant to valuation of securities. The strong form component infers that professional portfolio managers and insiders are consistently unable to earn extraordinary returns in the security markets. Compare weak form. See also semistrong form.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.