An efficient market refers to a market where all information will be quickly understood by market participants and immediately reflected in the market price. This theory assumes that investors who participate in the market are rational enough to respond to all market information quickly and reasonably. The efficient market hypothesis holds that in a society full of information exchange and information competition, a specific information can be known to investors in the stock market quickly. Subsequently, the competition in the stock market will drive the stock price to fully and timely reflect this group of information, so that the transaction of this group of information has no abnormal returns and can only earn the average market rate of return after risk adjustment. As long as the market price of securities can fully and timely reflect all valuable information, and the market price represents the real value of securities, such a market is called an "effective market".

For example, Lazy-T Oil Company has just discovered oil in gulf of alaska. This was announced on Tuesday morning at 1 1: 30. When will Lacey -T's share price rise? According to the theory of efficient market, the news will be immediately reflected in the price. Market participants will respond immediately and raise Lacey-T's stock price to its due height. In short, at every point in time, the market digested all the latest news available and included it in the stock price, grain price or other speculative prices.

This means that if you see a big frost in Florida in the newspaper, don't think that you can make a fortune by buying frozen orange juice futures during lunch break; At the same time as the news reports, even before that, the price of orange juice has gone up.

Efficient market theory holds that the market price already contains all available information. It is impossible to make money by looking at past information or past price changes.