What do we Know about Stock Market “Efficiency”?

Abstract

This paper surveys the development of the term "efficiency" in the context of security prices and reviews the principal definitions of "efficiency" that have been proposed, in terms of their likelihood of forming a basis for guiding and evaluating empirical research on the relation between information and prices. It asks what is presently knowable about efficiency, including the conclusions that can and cannot reliably be drawn from the evidence, given the present state of our knowledge about equilibrium security prices. It concludes with a cautious view on the limited reliable evidence concerning "efficiency".