Is the market efficient? I do not think so. Market is difficult to explain and there is so many uncertain things in capital market. So many experts learn about the efficient capital.

A capital market is efficient if the information is relevant. According to Fama (1970), there are three information types in capital market such as (i) past price changes (ii) public information and (iii) public and private information. 

Today. Most corporate finance or investment book said that there are three market efficient forms :

1. Weak form, the market capital reflects the previous market. This form just recognizes the past price of shares. This is the most easy strategy because we do not have to analyze the company, economic condition, merger and acquisition announcement, etc. This analysis is also cheap because we just need historical stock price that we can get from yahoo finance or google finance. To make graphics, you will need some technical analysis software.

The equation of weak form efficiency is :

P_t = P_t-1 + Expected return + Random Error_t

As I told before, the current stock price is equal with past stock plus expected return plus Random Error. Unfortunately the calculation will not exactly especially when the random high. No one can predict the random.

The analyst who believe this strategy often use chart so they are called as chartists. They use historical price of the stock and make some graphics. They analyze the pattern of the graphs and predict when the share go up or down.

Chartists believes the pattern of stock will be over and over again. They will follow the pattern of the graphics as buying or selling guidance. 

2. Semi strong form, the market price also reflect all published information including audited financial statement, dividend, announcement, merger announcement, etc. In most case, some information will influence the stock price movement. For example, in my country, the third winner in last election party has chosen a taipan as the leader. The stock which is owned by the taipan is increasing. In my country, the politics even influence the stock market.

In some condition, not all information influences the stock market immediately. For example, a company announces the increasing revenue. If the market is semi strong efficient, the price should rise immediately upon the news release. Thus, the investor would end up paying the higher price, eliminating all chances for profit (Ross, Westerfield and Jaffe, 2002; p. 346).

Some analyst who use this analysis must have statistics and economic skill beside finance and investment knowledge. The analyst should have also intuition, talent, ability and time.

3. Strong Efficiency market, this strategy is contain weak form and semi strong strategy.

The experts debates about whether the market semi strong form or strong form.Most investor agrees that the most stock reflects the available publish information.

This form complete the semi strong that just use public information only or weak form that just use past historical stock price.Unfortunately, the market is not efficient as we think and we cannot get prosperous to using it.Even a insider trading could not get benefit from the market. When the insider buy a share, other investor may  follow their action. The stock may rise and the investor could not get higher return.