Traditional statistical tests of serial independence of stock price changes often show that stock markets are ineffi cient. Our analysis on daily and monthly data confi rms this fi nding for the Croatian and U.S. markets in the 2002-2010 period. However, this result seems to be mainly due to the impact of the crisis of [2008][2009]. The observation of monthly data in the pre-crisis period suggests market effi ciency in the U.S. and (rather surprisingly) in Croatia also. Daily data indicate a high degree of effi ciency of the US stock market before the crisis, but it is impossible to conclude with a satisfying level of confi dence that the Croatian market was ineffi cient in that period.Furthermore, an elementary moving average crossover trading system beats the CROBEX and S&P 500 indices from 1997 to 2010, indicating market ineffi ciency. Still, if the same trading rule is applied to the S&P 500 index in an extended time period between 1950 and 2010, the conclusion about market ineffi ciency becomes less convincing. It seems that (in)effi ciency varies both across markets and in the same markets in the long run, but it still remains unknown which processes are the driving factors behind these changes.

Despite many "refutations" in empirical tests, the efficient market hypothesis (EMH) remains the central concept of financial economics. The EMH's resistance to the results of empirical testing emerges from the fact that the EMH is not a falsifiable theory. Its axiomatic definition shows how asset prices would behave under assumed conditions. Testing for this price behavior does not make much sense as the conditions in the financial markets are much more complex than the simplified conditions of perfect competition, zero transaction costs and free information used in the formulation of the EMH. Some recent developments within the tradition of the adaptive market hypothesis are promising regarding development of a falsifiable theory of price formation in financial markets, but are far from giving assurance that we are approaching a new formulation. The most that can be done in the meantime is to be very cautious while interpreting the empirical evidence that is presented as "testing" the EMH.