What does an increase in market efficiency imply for investors?

An increase in market efficiency implies that all available information is fully reflected in asset prices, making it more challenging for investors to achieve returns that exceed the market average consistently. In an efficient market, prices adjust quickly to new information, which means that any potential for above-average returns is arbitraged away as more investors recognize and act on the available information. As a result, while investors can still earn positive returns, consistently obtaining returns that exceed the average, after accounting for risk, becomes significantly more difficult.

This does not suggest that investors cannot ever achieve excess returns; rather, it emphasizes that in an efficient market, doing so is not something that can be relied upon on a regular basis. Investors may still experience gains during favorable market conditions or through skilled investment strategies, but these instances become more the result of chance or unique skill rather than a systematic ability to outperform the market.