"An 'efficient' market is defined as a market where there are large numbers of rational, profit-maximizers actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants. In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future. In other words, in an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value." - Fama, 1965 It is poor and misleading for the speculator. Not all participants receive the information at the same time, and all are subject to interpret that information differently. In fact, these is no such thing as "intrinsic value". The idea is that there is some fair value for a stock, and the best estimator of that value willl win, by identifying when this value does not correspond with current prices in the marketplace. In fact, the "fair value" does not exist and the stock is worth exactly what someone is willing to pay for it at that moment in time.

I think you mistranslated what he said and your conclusion appears to be exactly the same as him except that you claim without justification that fair value doesn't exist Stock Market and modelisation of market's investment return if translated from french http://images-eu.amazon.com/images/P/2717835652.08.LZZZZZZZ.jpg I have read the book above in 1998 - for studying my model because I wanted to look at official state of the art so as not to reinvent the wheel - it has 290 pages and more than 50% deals with efficiency hee hee ! I will make a white-paper one day for fun on that subject. But it is not only for fun thinking about efficiency or rather its paradox can lead to concrete model - of course not alone it's one of the ingredient for research of an econometric model. At the moment I will say that it is simplist to say that fair value doesn't exist. It must be since some "gurus" jumped on the pretext that mathematicians (like Levy towards 1962) have studied probability distributions that have no mean and no variance that they spread the idea of no fair value but the probability law family above is only purely mathematical abstraction it doesn't imply that it corresponds to reality and I affirm that it is far from reality. As for efficiency I would say that there is no absolute definition and that Fama's definition is not perhaps the real definition of efficiency. If you think that I said a non-sense take an other term: the number. For 2000 years a number was attached to counting process and it has lead to many paradox notably the paradox of Xenon on infinity (the story of Achile and the tortoise) and questioned about the validity of integral calculus. It is only recently at the beginning of the century with mathematicians like Bertrand Russel that number has been redefined as an abstract class so that paradox has been resolved and that a new area of mathematical research has ben opened. So you see what the impact of finding the true definition of something that exists before it can even be defined.