Capital Market Efficiency Theory

Market efficiency is of great importance because if the capital market is efficient, both the price of securities is determined correctly and fairly and the allocation of capital, which is the most important factor in economic production and development, is carried out in a desirable and optimal manner.

Based on the types of relevant information, market efficiency is classified into three forms:

- Weak form of market efficiency: Prices reflect all past information and information related to past prices is not useful and relevant in obtaining additional returns. The presence of weak efficiency prevents obtaining additional returns through the use of momentum strategies.

- Semi-strong form of market efficiency: Prices reflect all publicly available information and fundamental analysis does not lead to obtaining additional returns.

- Strong form of market efficiency: Prices reflect all information and even individuals within the company cannot obtain additional returns.