The Efficient Market Hypothesis
Eugene Fama · 1970
"Fama formalized that in an efficient market, prices already reflect all available information of that form — weak, semi-strong, or strong — so consistently beating the market requires either private information or a risk premium, not just public analysis."
Fama's 1970 review made a stark claim: if markets are efficient, the chart pattern you think you see has already been arbitraged away before you saw it.
Weak form: past prices already in price. Semi-strong: all public info already in price. Strong: even private info is in price (rarely holds). Efficiency is not that prices are right, but that they are hard to systematically beat after costs, because competition among informed traders moves price toward value quickly. The tradable insight is not nihilism but cost: active outperformance must overcome fees, taxes, and the fact that everyone else read the same filing.
What does semi-strong market efficiency imply about using public filings to consistently outperform?
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The explanation above is written with AI assistance. These are the originals — go to them to check it.
- Efficient Capital Markets — EMH (Fama, 1970)Eugene Fama / Wikipedia
The Kelly Criterion & Position Sizing
"Kelly derived the fraction of bankroll to bet to maximize long-run logarithmic growth — bet too little and you compound slowly, bet too much and a single bad run wipes out the geometric advantage even with a positive edge."