by Madhav Kapoor
The Efficient Market Hypothesis (EMH), also known as the efficient market theory is a hypothesis that states share prices reflect all information and consistent alpha (term used in investing to describe a strategy's ability to beat the market) generation is impossible.

According to EMH, stocks always trade at their fair values on exchanges, meaning it is impossible for investors to buy stocks that are undervalued or sell stocks that are overvalued. Therefore, it is impossible for investors to outperform the market through expert stock selection or market timing.
The proponents of the theory argue it is pointless to search for undervalued stocks or try to predict trends, rubbishing the foundational stones of investing: fundamental and technical analysis. This is because the believers of EMH argue that since the market absorbs all the information and the prices at which stocks are traded are always fair, there is no form of analysis that can help investors beat the market.
The conclusion of the Efficient Market Hypothesis is that the market is highly intellectual and it has the ability to consume all available information and factor that into the prices of securities, making it “fair.” This means that investors could do better by following a passive approach and investing in index funds.
Although it is at the center of modern financial theory, no other theory in economics or finance generates a more passionate discussion between its challengers and proponents.
Noted Harvard financial economist Michael Jensen writes “there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Market Hypothesis,”.

Peter Lynch
On the other hand, investment maven Peter Lynch claims “Efficient markets? That’s a bunch of junk, crazy stuff.”
I believe that the EMH is highly controversial and inefficient. Why? Mainly because of the following reasons:
Different investors perceive information differently.
There is a time lag between the availability of information and the change in stock price.
Stock prices can be affected by human errors and misjudgments.
Investors have proven that they can profit from market anomalies.