3 ms·
EMH says that prices reflect information, if anything it's a statement about the mean/expected return. What you are probably referring to is CAPM which has this
by zmk_ 7y ago
EMH says that prices reflect information, if anything it's a statement about the mean/expected return. What you are probably referring to is CAPM which has this baked in as an assumption on people's preferences.
- mruts 7y agoEMH directly implies that it’s impossible to beat the market on a risk-adjusted basis. Therefore, all above market return is just compensation for bearing additional risk. Therefore EMH is fundamentally about there only being one Sharpe ratio, the market Sharpe. Though you could also say it’s about the market incorporating all known information because that and there only being one Sharpe ratio mean pretty much the exact same thing. Moreover the implications of CAPM and EMH are pretty much the same.