How does the Efficient Market Hypothesis primarily view share prices?

The Efficient Market Hypothesis (EMH) posits that share prices reflect all available information, ensuring that they are fair in relation to the risks associated with an investment. This means that at any given moment, a stock's price accurately represents its true value based on the information available to investors, which includes public knowledge of the company's fundamentals, market conditions, and economic indicators.

In this framework, participants in the market are assumed to act rationally, processing information and adjusting prices accordingly. As a result, it is difficult for investors to consistently achieve returns that exceed average market returns on a risk-adjusted basis, because any potential for above-average returns is quickly eroded through price adjustments. This concept asserts that even though individual share prices may fluctuate based on new information, the overall market efficiently incorporates that information into the price, ensuring that it remains a reflection of fair value considering inherent risks.

Consequently, the focus on fair pricing based on inherent risks aligns with this understanding, where the market is assumed to be highly efficient in absorbing and reflecting all relevant information promptly.