Efficient markets theory is a field of
economics which seeks to explain the workings of
capital markets such as the stock market. In an efficient market, the prices of stocks reflect a rational assessment of the true underlying worth of a stock. This can be contrasted with an inefficient market in which prices might be affected by other factors such as fashion, greed, panic and
stock market bubbles. A central part of this theory is the
Efficient market hypothesis.
See also: insider trading, technical analysis