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The Theory of Efficient Markets is based on the concept that all the available information is in the Stock Price. Therefore, Alpha generation is not possible. Increased returns can only be achieved by increased risk.

If the individual Share Prices incorporate all the available information to investors, then the Stock Market would be considered efficient. This is the Theory of Efficient Markets. If Stock Markets are efficient, then consistent Alpha generation is not possible. If listed Stocks are always to trade at a fair value price, it will be impossible to Buy Stocks considered to be Undervalued or Sell Overvalued Stocks. Then the theory is that an investor’s return will be determined by the level of risk taken. There is no Alpha generation via Stock selection or the timing of market transactions. If one agrees with the Theory of Efficient Markets, then the logical investment is a low-cost, passive portfolio. If one disagrees with the Theory, then Stocks can deviate from their fair market values and research does add value and can generate Alpha.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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Smartest Data aims to be your go-to source for analysis and commentary on Investments, Personal Finance and the Global Stock Markets. The aim is to provide our readers with insightful and actionable information for independent minded Investors.  Dissecting  the daily avalanche of Data produced by the Stocks Market by using data Websites  and Apps available to people at home. Join us, to be Driven by Data to navigate the Investment universe markets and make better informed investment decisions.