1. Efficient market hypothesis
   1. Three forms of market efficiency
      1. Strong form efficient
      2. Semi-strong form efficient
      3. Weak form efficient
         1. Weak form efficient if it is not possible to predict changes in future prices on the basis of past information about those prices
            1. This rules out things like the chartists/technical analysis.
      4. These are an ascending hierarchy. Eg if a market is strong form efficient it will be the other two, but not vice versa
   2. What do we mean by efficiency?
      1. It's about the processing of information by that market. How well does a particular market process all the flows on information into prices?
         1. By well we mean both rationally and quickly
            1. The 'rational' share price is defined as the expected value of all future dividends including terminal dividends appropriately discounted
         2. No use for a market to process information slowly so it eventually catches up
         3. No use for a market to make up prices in a vacuum or by mere sentiment
2. Twin functions of stock market
   1. Raise new capital
      1. Only a small amount (negative net at times) of real investment is actually financed by this primary function
   2. Create a secondary liquid market in existing shares.
      1. Also to try and ensure fair valuations on existing shares/companies
         1. In order to price new securities correctly
         2. In order to provide valuations of a company for M&A activity.