Efficient Market

One important idea in economic and monetary theory is that of an efficient market.

This is a theory that states that the financial markets reflect to a full extent all of the information that is available in the public domain at a given time. In practice this means if a company is expected to give out bad results in a couple of weeks, then this will effect the price now (this is often called 'factored in to the current price').

This is why often if a company has good results the share price can go down slightly, because the fact they were going to be good was already factored into the price and infact there was other news that day that swayed it down, or perhaps they weren't actually as good as expected leading to a small correction.

The theory causes wide disagreement to this day.

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