The extent to which securities prices reflect what's known and adjust promptly to what becomes known. With modern telecommunications, a vigorous business press and a large number of buyers and sellers, American securities markets are pretty efficient, but there is perennial debate surrounding the question: how efficient? Absolutists (advocates of the efficient market hypothesis) contend that the markets are utterly efficient, meaning that all available information is already discounted in prices. The implication is that it isn't possible for an investor to ""beat"" the market without some secret inside information, or perhaps clairvoyance. If you're in this camp, index investing makes a whole lot of sense, and indeed, it's awfully hard for most money managers to beat the market consistently. At the other end of the spectrum, value investors contend that intensive spadework can turn up undervalued stocks that have been overlooked by the market at large. A number of investors, such as Warren Buffett, evidently do accomplish this on a consistent basis.