Efficient-market hypothesis (EMH).

The efficient-market hypothesis (EMH) is an economic doctrine about prices, particularly the prices of stocks and other securities. The hypothesis asserts that the price of a stock is closely related to its underlying value. Although the classic form of the EMH applies to stocks, it has been applied to other types of markets as well. The EMH does not claim that the stock market is perfectly efficient or that the price reflects only the exact underlying value of the asset; indeed, barriers to trading or the sharing of financial information are thought to reduce the efficiency of a market. However, supporters argue that even though the EMH is not true in the strictest sense, it is highly accurate as an approximation. It has been claimed, with the increasing computerization of the market and the growing speed with which information is transmitted, the EMH is becoming more valid over time.