Question

What's Efficient Market Hypothesis? Why it is difficult to puncture a market bubble?

Answer 1

Market discounts everything, it reacts to the issues happened in and around the world. All the expectations of investors about the future cash flows reflects on the prices of the shares. How quickly and how accurately the market translates the expectation into prices is to be considered as market efficiency.

An efficient market is the one which considers every information in the market and it reflects on share prices in the market, is called as efficient market hypothesis. For reading and listening it is good and easy, but when it comes to practical, it is very difficult to understand and implement.

Most of the investors failed to estimate the movement of market due to many limitations. Majority of the times these investors becomes looser in the market. As market is a mind game, the one who dominates the market, the other is going to be struggle.