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Efficient markets theory(EMT) |
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Efficient markets theory(EMT)Principle that all assets are correctly priced by the market, and that there are no bargains.Efficient markets theory(EMT) Similar MatchesRegression coefficientRegression coefficientTerm yielded by regression analysis that indicates the sensitivity of the dependent variable to a particular independent variable. See: Parameter. Efficient setEfficient setGraph representing a set of portfolios that maximize expected return at each level of portfolio risk. Efficient market theoryEfficient market theoryThe theory that claims that the current price of a share reflects everything that is known about the company and its future earnings potential, and that is it impossible to beat the market consistently.Efficient market theory suggests that the army of analysts and fund managers in the City whose job is to actively manage superior-performing portfolios are engaged in a futile exercise because everything they find out is rapidly transmitted around the market, and share prices instantly reflect the common knowledge. In other words, no one can get one up on anyone else. And the logical extension of this is that passive funds - tracker and index funds - are the best place to park your money, because their management costs are much lower and they are mathematically structured to match the performance of their chosen index.Plenty of people disagree with efficient market theory, and their ranks include people like Warren Buffett who has consistently produced returns of over 20% on his portfolio over a 30 year period. Efficient diversificationEfficient diversificationThe organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk. Gini CoefficientGini CoefficientA measure of income inequality within a population, ranging from zero for complete equality, to one if one person has all the income. It is defined as the area between the Lorenz Curve and the diagonal, divided by the total area under the diagonal. Further SuggestionsEfficient marketInformation Coefficient (IC) Minimum efficient scale Efficient market Earnings response coefficient Efficient allocation Efficient capital market Coefficient of Variation Correlation coefficient Efficient frontier Operationally efficient market Coefficient of determination Inefficient portfolio Internally efficient market |
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