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The Efficient Markets Hypothesis (EMH) states that information is immediately integrated into prices. This claim is of course dependent on the definition of information. The Finance literature typically distinguishes three levels of efficiency according to the information set that is considered. Markets are said weak-form efficient if a past sequence of public data cannot be used to construct profitable trading strategies. They are semi-strong form efficient when all public information is priced and they are strong-form efficient if even private information is rapidly integrated into prices. Here the notion of rational expectations (RE) plays a major role. Investors are assumed totally rational and have a good knowledge of the so-called structural relationship of the economy...
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