| The Efficient Market Hypothesis (EMH), as exposed in Book 1, means that all available information is included in prices, which emerge from the consensus between fully rational agents. They would otherwise immediately arbitrage away any deviation from the fair price. Price changes can then only be the result of unanticipated news and are by definition unpredictable.
Then, a central prediction of the EMH is that prices should follow random walks in time, which is a good approximation of real market evolutions.
However, we have also shown that the observed volatility on the markets is much too high to be compatible with the idea of a full rational pricing. The copious trading activity is also a problem. On liquid stocks, there is typically one trade every 5 seconds, whereas the time lag between relevant news is much larger. It follows that the statement of the EMH according to which there is no way of making a profit on an asset by simply using the recorded history of its price fluctuations, is certainly not completely correct...
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