Question

What does the Efficient Market Hypothesis tell you to expect the stock market to do over the next six months?  What will be the impact of your answer to the first question on the bond market and interest rates?

Answer 1

Efficient market hypothesis advocates that all the privately available information and the publicly available information have already been discounted into the stock price and there is no scope for making any additional rate of return so investors should rather invest into passive securities rather than making active investment.

Hence ,In next six months investors should be trying to invest into index and passive securities which will be helping them to match the rate of return of the market so they can better select index fund to invest into.

Efficient market hypothesis always advocates that one should be trying to not time the entry and exit and rather stay invested in the indexes but Bond does not have any index so Efficient market hypothesis would be better applied in the context of the bonds in terms of treasuries so one can try to invest into treasury and make a risk free rate of return and not try to beat the rate of return of the market.