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The Efficient Market Hypothesis asserts that at any time the price of a stock on a stock market reflects all information about that stock and about that market, including any and all future expectations. That, in effect, "Mr. Market" knows everything before you do and in much more detail.

The basic premise of the theory is that information about every piece of information about the market has already been collected and analyzed by bazillions investors and this information is always reflected correctly in the price of any stock.

The problem with the theory's premise is that most investors (either individuals or institutional) in fact base their expectations on past prices and company performance--by analysing the historical data, or the company fundamentals.

Investor expectations control prices. Therefore, it seems that the efficient market hypothesis does not hold when past prices do have a influence on future prices.