A theory of financial markets that states that asset prices fully reflect all available information in the market. Since, according to the theory, assets are priced to perfection, investors will not be able to exploit discrepancies between price and intrinsic value to earn abnormal profits. Consequently, it should be impossible for investors to earn returns that beat the market, except by assuming higher investment risk. The theory was proposed by American economist and Nobel laureate Eugene Fama in 1970. It has come under criticism lately for ignoring irrationality among investors that can cause wide gaps between price and value for a long time.
