Theefficientmarkethypothesis (EMH) maintains that all stocks are perfectly priced according to their inherent investment properties, the knowledge of which all market participants possess equally.
With the recent explosion in behavioral finance and the shattering of our absolute trust of theefficientmarkethypothesis, Shiller explains Dodd-Frank and regulators in general is still lacking in recognizing our new understanding of the financial landscape.
Secondly, under theefficientmarkethypothesis, no single investor is ever able to attain greater profitability than another with the same amount of invested funds: their equal possession of information means they can only achieve identical returns.
Thirdly (and closely related to the second point), under theefficientmarkethypothesis, no investor should ever be able to beat themarket, or the average annual returns that all investors and funds are able to achieve using their best efforts.