The Efficient Market Hypothesis asserts that at any time the price of
a stock on a stock market reflects all information about that stock
and about that market, including any and all future expectations.
That, in effect, "Mr. Market" knows everything before you do and in
much more detail.
The basic premise of the theory is that information about every piece
of information about the market has already been collected and
analyzed by bazillions investors and this information is always
reflected correctly in the price of any stock.
The problem with the theory's premise is that most investors
(either individuals or institutional) in fact base their expectations on
past prices and company performance--by analysing the
historical data, or the company fundamentals.
Investor expectations control prices. Therefore, it seems that the
efficient market hypothesis does not hold when past prices do have a
influence on future prices.