Market efficiency refers to the degree to which market value reflects all available, relevant information. If the markets are efficient, then all the information is already included in the price, and so there is no way to “beat” the market because there are no worthless or overvalued securities available.

The term was taken from a paper written by economist Eugene Fame in 1970, but Fame himself admits that the term is somewhat misleading because no one has a clear definition of how this thing called market efficiency can be fully defined or measured accurately. Despite such limitations, the term is used to refer to what FAME is best known for, the Efficient Market Estimates (EMH).