Just like the rest of economics, the efficient market hypothesis is a nice model without any basis in reality. The fact that speculative bubbles exist should be enouh to disprove it.
The efficient markets hypothesis does not, and has not, stood up to empirical research since it was first invented. The reason that it's a hypothesis, and not a theory, is that it's impossible to disprove because all of evidence that disagrees with it is dismissed as spurious.
The (strong form) efficient market hypothesis (EMH) doesn't state or require that there be no bubbles. The EMH means that bubbles are extremely hard to predict/see, largely because of the market's feedback loop.
You are kindly ignoring speculation. What you presented is an efficient market hypothesis, however markets are not efficient. They invite speculation bubbles and they do crash.
The efficient market hypothesis is not an example of good science. It's still only a hypothesis because there's so little evidence to support it. The market is rife with failures due to all the quirks of human psychology. Any realistic model for the future must be built on the framework of behavioral economics.
As you perfectly expressed, "efficient market" is nothing more than an hypothesis. In fact, it has been proven essentially false repeatedly, theoretically by Kahneman among others, and in practive through many a crisis, bubble, etc.
Arguably "mainstream economics" could be nothing more than a religion, and a very dangerous one by its very high though undeserved power.
The efficient market hypothesis seems easily disproven with a number of modern examples. Climate change for example - there is significant information available, but markets act as though the information is fake. Leading investors and corporations have for decades denied the risks associated with economic growth backed on non-renewable, polluting and greenhouse-effect-causing energy sources.
The hypothesis does not account for common irrational behavior among people; that real news is considered fake, or real crises considered non-crises.
"A random walk down Wall Street" is quite the contradiction of a book, though. It simultaneously claims that markets are so efficient that a lay-person cannot profit from them while acknowledging the existence of asset bubbles. The whole "efficient market hypothesis" to me seems much more like a religious belief among neoclassical finance types than anything actually scientific.
Furthermore, there's a fair amount of research that suggests that Brownian motion/random walk does not at all explain the movements of a stock's price [1][2][3]
The efficient market hypothesis (the idea that the market is by definition perfectly valued at every moment) is highly controversial, and actively rejected by many finance and economics experts of all political views.
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