Efficient Market Hypothesis.
A definition, in plain English — with the books that teach it.
What it means
The theory that asset prices already reflect all available information, so consistently beating the market through stock picking or timing should be impossible after fees and taxes. The weak, semi-strong, and strong versions differ on which information is priced in. The honest read: markets are mostly efficient most of the time, which is why low-cost index funds beat most active managers over long periods — but episodic mispricings (bubbles, panics) are well-documented.
Example
Over 20-year windows, roughly 90% of active U.S. large-cap mutual funds underperform the S&P 500 net of fees (per the SPIVA scorecards). Strong evidence in favor of EMH for that asset class — and the case for index funds for most investors.
