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>> you'd have lost money on most and only gained money in Ford, GM, Dodge, and overall you would only make a reasonable about of money. That is an argument in
by blacksmythe 16y ago
>> you'd have lost money on most and only gained money in Ford, GM, Dodge, and overall you would only make a reasonable about of money.
That is an argument in favor of the efficient market theory. The car companies were correctly priced, based on the market size that resulted and not knowing which car companies were going to make it.
The efficient market theory certainly breaks down. For example, at the height of the dot-com bubble, many of the dot-com companies were valued as if it were likely they were going to take a very large share (if not most) of their intended market.
- anamax 16y agoThe efficient market theory doesn't say that the market predicts winners. It says that the market reflects all known (or knowable, depending on version) information. Actually, it doesn't say exactly that either, it says that prices reflect valuation (which is affected by knowledge) and resources. Sometimes "we" don't know, or the people who do know don't have enough resources to push the rest of us to the appropriate conclusion.