Efficient-market hypothesis

Have you ever played a game where some people have information that others don't? Like in the game "guess who," where each player has to ask yes or no questions to figure out which character their opponent has chosen. The game becomes easier if one player has more information, like knowing the answer to the question their opponent asks.

The efficient-market hypothesis is a big idea about how the stock market works. It says that all investors have access to the same information about a company, and markets will quickly adjust to any new information that becomes available. So it's like everyone playing guess who has access to the same clues and knows the same facts about each character. This means that it's very hard for any one person or group to predict which stocks will do well or poorly, because everyone else already knows the same things. So any new information is quickly incorporated into the prices of stocks, and it's very difficult to outperform the market by buying and selling at just the right times.

In summary, the efficient-market hypothesis is like everyone playing guess who having access to the same clues, so it's hard to outsmart your opponents. In the stock market, everyone has access to the same information about stocks, so it's difficult to predict which stocks will do well or poorly.