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Originally Posted by Knalus
Just curious, is this like saying, if the market was efficient, there wouldn't be bubbles, ie. the housing bubble, or the tech bubble, ect?
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Yes. Efficient Market Hypothesis assumes that all possible public information about a stock or asset is taken into account and priced into the asset at any given time and that all purchasers/sellers are perfectly rational and understand the fundamentals of the asset.
Bubbles occur when people buy for no other good reason than 'this asset has been going up' and the mass effect of all those people diving in for that very reason creates a positive feedback cycle that can go on basically as long as buyers have capacity to buy more.
The opposite can happen in crashes, where people sell , just out of fear it will go down more.