Eugene Fama is credited with formulating the Efficient Market Hypothesis.
The hypothesis holds that asset prices incorporate available information, making it extraordinarily difficult to achieve consistently superior risk-adjusted returns. Earlier ideas came from Louis Bachelier’s 1900 work on speculation and later contributions by Paul Samuelson, but Fama turned the concept into a modern, testable framework.
Fama’s 1965 dissertation examined stock-price behavior, and his influential 1970 review, “Efficient Capital Markets,” organized market efficiency into weak, semi-strong, and strong forms. These differ according to whether prices reflect past market data, all publicly available information, or all information including private information.
A common mix-up is treating the hypothesis as saying prices never move unpredictably or that markets are always perfectly rational. It instead makes a claim about the difficulty of systematically exploiting information after accounting for risk and costs. The theory remains central to finance, although anomalies, behavioral finance, and debates about risk models continue to challenge its strongest interpretations.