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I agree with you and disagree with other posters here. It's physically impossible for the market to be efficient.* Just try to use the efficiency for anything
by logicallee 10y ago
I agree with you and disagree with other posters here.
It's physically impossible for the market to be efficient.*
Just try to use the efficiency for anything (set up any series of steps where one of the steps is "...because the market is efficient, therefore...") and whatever you've just set up just plain won't work.
Since it's impossible, instead of any version of the efficient market hypothesis people should just say "God's will" (as in God's will that prices should reflect available information), and it will show how silly they are.
* you can email me if you'd like a rigorous proof that it is impossible
- jacques_chester 10y agoIt depends on what you mean by "efficient". The weak EMH is pretty simple: there's money to be made in arbitrage, but the act of arbitrage spreads information. So a price quickly converges to reflect available information. The harder participants try to beat the market, the harder it becomes. What's left is the lurch of prices upon truly novel information arriving. Stocks appear to move up and down at random, because future events are not fully predictable. If they were, prices would stabilise around the "true" price and remain stuck there. A similar argument has been used to show that time travel has not and will never be invented. Arbitrage across time would be even more profitable than arbitrage across space.