The efficient market hypothesis (EMH) is a theory in finance that suggests that financial markets are “efficient” and that asset prices already reflect all available information. According to this theory, it is impossible to consistently achieve returns in excess of the market average through stock picking or market timing because all relevant information is already reflected in the stock price.

The EMH has three forms:

1. Weak form: The weak form of the EMH suggests that all past prices and trading volumes are already reflected in the current stock price, and therefore, technical analysis cannot be used to consistently beat the market.
2. Semi-strong form: The semi-strong form of the EMH suggests that all publicly available information, including financial statements, news, and other market data, is already reflected in the stock price. Therefore, fundamental analysis cannot be used to consistently beat the market.
3. Strong form: The strong form of the EMH suggests that all information, including insider information, is already reflected in the stock price. Therefore, even insider trading cannot be used to consistently beat the market.

The EMH is a controversial theory, and there are many critics who argue that markets are not completely efficient, and that investors can find opportunities to outperform the market through various strategies.

Examples of each form of the Efficient Market Hypothesis (EMH) are:

1. Weak form: The “random walk” theory, which suggests that future price movements are unpredictable.
2. Semi-strong form: The immediate impact of a company’s earnings announcement on its stock price, which indicates that this information was already factored into the stock price before the announcement was made.
3. Strong form: A company’s insiders, such as executives or major shareholders, purchase or sell their own company’s stock. The strong form of the EMH suggests that even these insiders cannot consistently generate higher returns based on this information, as the stock price already reflects it.