Encyclopedia of Investment Terminology

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Efficient Market Hypothesis

The efficient market hypothesis, or EMH, is a hypothesis that suggests that prices of different financial instruments will reflect information that is available to them at that time. They will also change in value according to new information available. This includes news that can change the value of the investment at any given time. Although this is a popular hypothesis, there is concern that dependency on the EMH resulted in the 2009 economic crisis due to a lack of recognizing potential risks in the market.

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