Guys, you're getting silly.The efficient market hypothesis is simple: "Securities are priced as if the market incorporates all information." In the simplest reasonable example, the Capital Asset Pricing Model, securities are priced as if everyone agrees on the mean and covariance matrix of tomorrow's prices.The key is intermediate knowledge (known by some people but not others, or known partially, or knowble at a cost) does not affect the prices of securities. Everything is either known by everyone (the mean and covariance) or no one (what tomorrow's price will be) or is irrelevant to pricing (higher order moments). There is only one kind of uncertainty, and it is the same for everyone.This is not vacuous. The alternative is that disagreement about future return prospects affects prices. It could be true that Microsoft stock sells for $60 because some people think it should sell for $70, some think it should sell at $50, and the market clears at $60. This is supply and demand, the way everything else in the economy is priced. EMH says that is not true for securities, because securities are such close substitutes. Two stocks with the same Beta, added to a well-diversified portfolio, are identical.

I knew Aaron would save us from silliness!

The efficient market hypothesis is simple: "Securities are priced as if the market incorporates all information." In the simplest reasonable example, the Capital Asset Pricing Model, securities are priced as if everyone agrees on the mean and covariance matrix of tomorrow's prices. >>Vacuous possibly, silly I certainly hope so, but above all, meaningless.BTW I disagree about the mean and cov matrix of tomorrow's prices...does this throw a spanner in the works?P