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Actually, almost everything about Wall Street demolishes the efficient market hypothesis. Numerous studies have said that an index fund will almost always beat
by jbooth 16y ago
Actually, almost everything about Wall Street demolishes the efficient market hypothesis.
Numerous studies have said that an index fund will almost always beat a managed fund after you take out the management fees.
So who's paying all of these people's BMW leases? Their sales skills. If you can give an unsophisticated investor a fuzzy feeling that their money's safer with you than an index fund, you get your management fee, whether or not you outperform the market after it's taken out.
That's the opposite of the efficient market hypothesis, is it not?
- yummyfajitas 16y agoThe efficient market hypothesis states that a trader can't beat the market except by chance. Everything you just said is evidence in favor of efficient markets. http://en.wikipedia.org/wiki/Efficient-market_hypothesis http://en.wikipedia.org/wiki/Efficient-market_hypothesis
- jbooth 16y agoI thought he was referring to the old perfect information canard in misreadings of Adam Smith. Thanks. EDIT: I actually don't believe in that hypothesis, either :) I think stock prices are more reflective of crowd dynamics and emergent properties of the various algos (what % are computer driven, now?) than it is by actual prospects of the business in question. Tech stocks are a great example, I see them get pummeled or inflated for terrible reasons on the few occasions I look at market prices. So I think it's eminently beatable, both in an algorithmic and in a Buffet-fundamentals sense, I just think that anyone who beats it will naturally raise their management fees by just as much.