Efficient Market Hypothesis (EMH) or Random Walk Hypothesis

• It is based on the fact that markets are efficient and prices are independent of any movements in the markets. 
• Prices are independent of previous prices and indicate random movements.
• A major change in the stock prices are only due to disequilibrium in the demand and supply.

Three forms of Efficient Market Hypothesis (EMH)

1. Weak form EMH
   • A market is considered efficient when the subsequent price is independent of previous prices.
   • There is always a random walk and demand supply position affects prices.
   • Technical analysis will not be beneficial to the investors in decision making – it directly rejects technical analysis.
2. Semi-strong form EMH
   • Asserts that the security prices reflect all public information. 
   • It includes market information as well as non-market information like economic data, industry statistics etc. 
3. Strong form EMH
   • Security prices reflect all public information as well as private information.
   • It assumes that no single group of investors has any access to information which enables it to earn greater risk adjusted returns. 
   • No insider will have any information which will give him an upper hand