Is the Market Efficient?

Most of the fundamental finance theories we studied so far based on the assumption that the market is efficient. But according to the behavioral theories, investors (especially the individual investors) do not behave rationally, focus on loss aversion instead of risk aversion, and do not focus on the aggregate portfolio but only consider individual investment individually. As a result, the market should be inefficient. Does it mean that we should not stick with those fundamental theories?

Nowadays, there are Islamic bonds which cannot include stocks like winery and gambling. There are also people investing only in the environmental friendly stocks. More and more investors are not investing based on the fundamental economic values. Does it mean that the world’s market is becoming more and more inefficient?

Or would you say as the financial market becomes bigger and bigger, it is also more dominated by institutional investors, who generally will invest rationally as described in our textbooks? And as the general public are better educated, individual investors will also be investing more rationally?