Review the discussion and discuss whether you agree or disagree with the content and how can efficient market hypothesis be strong or weak.

The efficient market hypothesis (EMH), developed by Eugene Fama, explains that public trading markets provide efficiency demonstrated by market security prices. The EMH theory contends that since markets are efficient and current prices reflect all information, attempts to outperform the market are essentially a game of chance rather than one of skill.

The EMH is proposed in varying degrees from strong to weak. Weak belief or adherence to the EMH theory assumes that past security market price and volume data are not relevant to the current security market price, arguing that excess returns cannot be obtained by using technical analysis. Semi-strong belief or adherence to the EMH theory assumes that current security market pricing already factors available market and public information, arguing that excess returns cannot be obtained by using fundamental analysis. Strong belief or adherence to the EMH theory by a company manager or investor creates a perfect market assumption which contends that all market, non-market, public and private inside information is contained within the market security pricing. The strong form of EMH argues that consistent excess returns are not possible. Although it is a cornerstone of modern financial theory, the EMH is highly controversial and often disputed (Investopedia, 2018). Skeptics of the EMH theory point to consistently successful investors like Warren Buffet in argument of how invalid the theory is.

Regardless of an investors belief in the EMH, performing a financial statement analysis on a company can provide a significant advantage to an investor. A financial statement analysis provides an investor with understanding of a companys past, current and future, and performance. Utilizing ratios provided within a company financial statement analysis, an investor can measure the companys ability to pay current liabilities, turnover and cash conversion cycle, ability to pay debts and profitability.