Which hypothesis in financial economics asserts that asset prices fully incorporate all available information?

The hypothesis asserting that asset prices fully incorporate all available information is the efficient-market hypothesis.

The efficient-market hypothesis, or EMH, says that prices in competitive financial markets rapidly reflect relevant information. One implication is that investors should not be able to consistently earn returns above an appropriate risk-adjusted benchmark using information that is already available. New information, rather than widely known facts, should be what moves prices.

Eugene Fama’s influential 1970 review helped establish the modern framework, although earlier foundations include Louis Bachelier’s 1900 mathematical work on speculation. Fama classified market efficiency into weak, semi-strong, and strong forms, depending on whether prices reflect past trading data, all public information, or even private information.

The hypothesis is often confused with the claim that prices are always correct or that markets never behave irrationally. EMH is a testable theory about information and risk-adjusted returns, and economists continue to debate market anomalies. The random-walk hypothesis is related, but it is not the same answer: random walks describe a pattern of price changes, while EMH explains why predictable excess profits should be difficult.