What is the difference between adaptive market hypothesis and efficient market hypothesis?

What is the difference between adaptive market hypothesis and efficient market hypothesis Introduction: The Quest for Market Understanding Hello everyone! In the realm of finance, understanding market behavior is a perpetual endeavor. Today, we'll explore two theories that have shaped the way we perceive markets: Adaptive Market Hypothesis (AMH) and Efficient Market Hypothesis (EMH). While both theories aim to explain market dynamics, they offer distinct perspectives. Let's dive in! Efficient Market Hypothesis: The Foundation of Market Efficiency Efficient Market Hypothesis (EMH) posits that financial markets are inherently efficient. This means that all available information is instantaneously incorporated into asset prices. According to EMH, it's impossible to consistently outperform the market, as prices always reflect all relevant information. EMH is often categorized into three forms: weak, semi-strong, and strong, based on the level of information it assumes investors have access to. Adaptive Market Hypothesis: The Market as an Ecosystem Adaptive Market Hypothesis (AMH), on the other hand, acknowledges that markets are not always perfectly efficient. AMH recognizes that market participants, driven by their diverse beliefs and strategies, can influence prices.