Paraphrase use your own words:
2.1.2 Efficient market hypothesis
RWH is considered as a milestone for the development of the efficient market hypothesis with extensive empirical analysis and hence body of evidence accumulating since the 1960s and later. It is easy to realize important role of EMH in finance in particular and economic in general as Jensen (1978, p.95) states that "there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Markets Hypothesis". Thus, EMH is a fundamental theory needed by investors and managers fund to do strategy investment.
First of all, a completely efficient market is the market in which asset prices fully reflect all available information (Fama, 1970). The efficient market is described as a fair game for investors or players. Investors can believe that current market price reflect all available information and even the expected return including risk consideration (Reilly and Brown, 2009). Fama also divided the efficient market into three different forms based on the ability and speed in processing information of the stock market (Yen and Lee, 2008). They are weak form, semi strong form and strong form.
- Weak form:
Clarke et.al.prx.proxywebsite.co.uk (2001) explained the weak form of EMH that no one could beat the market by using historical prices. It is due to current stock prices reflects all of the past relevant information. Moreover, this information is available to get by anyone, thus it is obvious that something which is known by everyone could not make profit. That means that almost strategies based on historical data of stock prices are useless. This view is in agreement with RWH as Fama (1965) said future stock price are impossibly forecastable by using past returns.
Although a stock market in a weak form of efficiency there is still a strategy to gain abnormal return. Technical analysis techniques is clearly unsuccessful in create excessive returns in this case, however some fundamental analysis techniques may still work well. In weak form of EMH, previous price still could be good information to combine with fundamental indicators of stocks for indentifying whether stock is undervalued or overvalued. Hence, fundamental analysis still has high potential opportunities to beat the market just by investigating fundamental information like financial statements in a weak efficient market (Das and Arora, 2007).
Weak form of EMH seems to be received the most supports among three EMH forms. Many analysts carried out the test of predictability by using past information. Almost of them give similar conclusion of weak efficient form such as Cowles and Jones (1973) and Working (1934). Then, Fama (1970) in his big research including summary of development and previous random walk literature also supported to weak form of market efficiency. For example, Fama and Blume (1966) found no excessive return by applying technical analysis techniques on US stock market. His research indicated a strong support of weak form of EMH (Dimson and Mussavian, 2000).
In contract, there are some evidences about inefficient market even in the weak form which could not be ignored. For instance, Merton (1980) points out changes of variance might be forecasted from past return. Many researches about EMH have been taken decade by decade together with the increase of proof about success of a variety of investment strategy using past stock information as a rejection of weak form. Among those findings, Jegeesh and Titman (1993) was one of the most remarkable studies. It demonstrated that the trend of stock movement during six to twelve months can predict the future stock price changes. In other words, future stock price may be in the same direction with it's of the past six or twelve months. Likewise, Debondt and Thaler (1985) even found the predictability in the future stock price based on a long term trend. Following that, Fama (1992) admitted that stock returns are likely to be forecasted.