The Efficient Market Hypothesis (EMH) is a theory that suggests that it is impossible to beat the market because the stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments. However, Warren Buffet, a successful investor, managed to consistently beat the market, providing a counter-argument to the EMH. Buffet's investment strategy is all about selecting quality shares at low prices and holding onto them for a long time. Buffet believes in thoroughly understanding a company's business and its prospects before investing in it, rather than looking at short-term market trends.
When a group of economists came up with the Efficient Market Hypothesis, to explain how it was impos...
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