Capital Ideas for Efficient Markets

“A market where there are large number of rational, profit maximizers actively competing, with each other trying to predict future market values of individuals securities and where important current information is almost available to all participants” Eugene Fama on Efficient Markets    

The theory of random walk led to the efficient market hypothesis. Eugene Fama, the father of modern mathematical finance, is one of the most brilliant economists of the modern era. A Nobel Laureate, Eugene’s work on efficient market hypothesis and asset pricing are crucial in determining modern portfolio theory. The Efficient Market Hypothesis presumes markets are informationally efficient. The theory proposes that current security prices reflect all the available information. The Theory of Random Walk is the underlying concept defining the Efficient Market Hypothesis. To understand the concept of efficient markets, lets look at the beginnings’ of Wall Street.

Capital Ideas, The Improbable Origins of Modern Wall Street

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