Efficient-market theory still assumed securities had intrinsic value rooted in corporate fundamentals

Evidence

Efficient-market theorists agreed with fundamentals analysts that securities had an intrinsic value that was rooted in the reality of the economic situations of the corporations that issued them. However, efficient-market theory posited that market prices were the best available estimators of that intrinsic value: that was part of the meaning of the statement that “prices always `fully reflect’ available information” (Fama 1970, p. 383). Corporate fundamentals mattered, but, precisely because there were many skilled and intelligent analysts scrutinizing their implications for stock prices, such implications would already have been incorporated into prices. In consequence, if markets were efficient, fundamentals analysts were wasting their time looking for cases in which intrinsic value differed knowably from market price. — Donald MacKenzie, An Engine, Not a Camera, 342

Categorization

• DEFINE: Distinguishes efficient-market theory from the claim that fundamentals don’t matter — the theory’s radical move is asserting prices already incorporate fundamentals, not denying them.
• XREF: Connects to the performativity thesis’s later demonstration that the CAPM and Black-Scholes changed the very markets they described — this is the descriptive baseline the theory claimed for itself. — connects to: Asset value derives from future earnings rather than intrinsic commodity value — Kean Birch, Rethinking Value in the Bio-economy:…, 73; Efficient-market theory holds stocks are interchangeable rights to income streams — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 460; Efficient-market theory holds that stock demand curves are essentially flat — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1503 (+2 more)

Broader Connections

• Efficient-market theory holds stocks are interchangeable rights to income streams #expands (0.90) — Donald MacKenzie, An Engine, Not a Camera, 460
• Efficient-market theory holds that stock demand curves are essentially flat #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1503