Understanding Market Efficiency

Market efficiency is described in terms of how prices reflect available information. Insiders may possess special information, suggesting that the market is not efficient for them, while for the general public, market efficiency may be a good approximation. The efficiency of markets is nuanced, as Eugene Fama points out, highlighting a shift from a strict interpretation of perfect efficiency to a more complex view of how efficiency applies to various investors. This establishes a place for semi-strong efficient markets hypothesis, though Fama himself critiques traditional characterizations of these terms.