I think the record needs clearing up here, many recent academic articles dispute efficient market hypothesis to one degree or another. One thing people should know about economics is that there are no 'laws' and academics keep changing academics. let's see if I can dig up a few.... In an efficient market, one should get a Hurst exponent of 1/2 on price data, yet here's one that did not get it: http://economicsbulletin.vanderbilt.edu/2007/volume7/EB-06G10032A.pdf What I find interesting is that H varies with time, that means market efficiency, if we are measuring it correctly, varies with time. A good paper explaining the Hurst exponent: http://qianbo.myweb.uga.edu/research/Hurst.pdf There was also one on the Dow by Alverez I think, but I didn't bookmark it. Mantagna and Stanley have been pioneers in a new area called econophysics, a personal favorite academic area of mine. They have studied price returns and fat tails on the S&P500 ad nauseum and found some price correlations on the short time scale if I remember correctly. I think one could conclude the market has a memory of about 20 minutes. Here's a good slide show, look up the papers yourselves: http://polymer.bu.edu/~hes/econophysics/pasi06eco.pdf As a last note, just to quote these particular academics and say that people around here need to stop misrepresenting the academics http://www.cscs.umich.edu/~crshalizi/reviews/intro-to-econophysics/ In these strange days, it sometimes seems that every schoolchild knows the argument for the efficient market hypothesis, but here is the EMH one more time. Consider an equilibrium financial market, populated by rational agents. The price an agent will pay for a financial instrument is its net present value to him --- his estimate of future returns, discounted for time-preference and risk. Since the agents are rational, their estimates of future returns will accurately incorporate everything they know. Hence prices change only when tastes (for risk and for time) change, or when unpredictable information arrives. If a piece of news could have been predicted, it would have been, and already reflected in prices. Hence, given rational expectations and market efficiency, prices are unpredictable, i.e., price changes are independent random variables. A few more hypotheses lead us to expect that changes in the logarithms of prices are independent, identically distributed Gaussians, and so that financial time series should look like (multiplicative) random walks. This is a strong, elegant and fruitful hypothesis, marred only by being quite wrong. Traders are not perfectly rational, and could not be. Markets are inefficient, both in microscopic ways (e.g., transaction costs), and in global ones, as shown by persistent ``anomalies''. Even over very short times, log price changes are non-Gaussian --- the peaks are too sharp, while the tails are ``fat,'' decaying too slowly, roughly as a power law. Worst of all, financial time series are predictable; though correlations in the price changes themselves quickly decay, nonlinear functions of price changes stay correlated over very long times. If markets are efficient, then prices are totally unpredictable; but prices are predictable; therefore markets are not efficient.