3 ms·
For the sake of argument I will state the efficient market interpretation: What we call the business cycle is actually just good and bad runs in a series of ind
by im2w1l 11y ago
For the sake of argument I will state the efficient market interpretation: What we call the business cycle is actually just good and bad runs in a series of independent random events. I don't really believe it, but would nevertheless enjoy it if you argued against that position.
- tim333 11y agoI don't think the efficient market hypothesis argues that there are no business cycles, only that stock market prices anticipate recessions coming so you can't make a profit by selling when it looks like things are going to tank.
- tomp 11y agobehavioural economics: there are positive feedback loops (things get better => people/companies earn more money => they can borrow more => they spend more => things get better) in both directions (things get worse => people/companies earn less => they can borrow less or go bankrupt => they spend less => thing get worse), so even if the underlying events (the external input into the system) are independent and uniformly distributed, the characteristics of the system produce cyclical effects.