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Are stock markets predictors of future economic activity?

According to the efficient-markets hypothesis (EMH), financial markets are "informationally efficient". Therefore, prices on traded assets such as stocks and bonds, reflect all known information, and it is consequently impossible to consistently outperform the market by using any information that the market already knows, except through luck. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future. more...