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Perfect efficiency does not exist. Some efficiency does. There are three variants of the hypothesis: "weak", "semi-strong", and "strong" form. [1] Insider infor

Perfect efficiency does not exist. Some efficiency does. There are three variants of the hypothesis: "weak", "semi-strong", and "strong" form. [1] Insider information isn't some conspiracy -- people have gone to jail over it year after year. With information disparity, efficiency is always going to be a fraction of what it could be. Just think about two parties -- one thinks the stock should be high because of insider information. And lets say they are also mega-rich big bucks. The other party is people without the insider info, they think the stock should be low. So Mr. Mega-Rich buys a lot of shares, the stock goes up. Then it falls back down because no one else wants to buy it at that high price. These oscillations will continue as Mr. Mega-Rich takes advantage of his insider information - and the more trading volume on the buying end, that he provides, the more choppy the market for that equity will be. If Mr. Mega-Rich is continuously buying, that choppyness won't go away - lest other parties take his actions to be information itself, and adjust their appraisals. Wall Street I and II aren't the most accurate pictures, but they certainly aren't fiction. If you aren't the shark, you're getting sharked. But because of 21st century prosperity, you still might be happy with your returns, even while paying the tax of giving money to those with better information. [1] https://en.wikipedia.org/wiki/Efficient-market_hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis

chibg10 9y ago
> If you aren't the shark, you're getting sharked People say this a lot, but I think it's misleading to most who hear it. This is certainly true in a trading context (i.e. where the buy/sell time horizon is short enough where the underlying asset's economic value doesn't change, though the market price might), but not in an investment context (where it's expected that the inflow of capital will create economic value and the stock price will reflect that). The takeaway is that you should leave daytrading to the pros, and instead bet on humanity improving the means of production over long time horizons. Unless you're actually a pro and have good reason to believe you can beat the market.

chibg10 9y ago

> If you aren't the shark, you're getting sharked People say this a lot, but I think it's misleading to most who hear it. This is certainly true in a trading context (i.e. where the buy/sell time horizon is short enough where the underlying asset's economic value doesn't change, though the market price might), but not in an investment context (where it's expected that the inflow of capital will create economic value and the stock price will reflect that). The takeaway is that you should leave daytrading to the pros, and instead bet on humanity improving the means of production over long time horizons. Unless you're actually a pro and have good reason to believe you can beat the market.