Definitions for "What is Market Efficiency?"

Efficient Market Hypothesis (EHM) – It is the idea that the market accurately reflects all the information in the market at that moment in the prices that are shown. This then gives buyers and sellers no advantage because they can not gain an “upper hand” in knowing something that the majority doesn’t know when the majority already knows everything, because the prices accurately reflect the market at that moment.
Behavioral Finance – It is a branch of finance that concludes based off of investor’s mindsets. The ideas that an investor will buy low and sell high, and that prices are being manipulated by profit seekers are main themes.
January Effect – The idea that prices tend to be higher at the beginning of the year a trend that is an argument against Efficient Market Hypothesis.
How does a market become efficient? – In order for a market to become efficient a investor must believe that they can beat the market. A market must be large enough and flexible enough to allow large sets of information to released to an investor. Also, the strategies that investors use to take advantage of the inefficiencies of a market, which actually fuel the market and make it, ironically, efficient.