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According to EMH, all information is subsumed into the price. As such, how could the huge 2018 Christmas drop affect future returns?
by smabie 7y ago
According to EMH, all information is subsumed into the price. As such, how could the huge 2018 Christmas drop affect future returns?
- barbecue_sauce 7y agoMaybe EMH isn't correct?
- hamilyon2 7y agoWeak forms of EMH are almost certainty correct. If they were not, you could beat passive investing with relatively little work, and that is impossible.
- VHRanger 7y agoStatistically it's not incorrect. While you should be skeptical of strong forms of the EMH, all evidence points to weak forms of the EMH being true. A corrolary that is good to keep in mind is "markets are more efficient than you're smart" -- prevents you from starting doomed financial enterprises
- perl4ever 7y agoHow could there be a huge temporary drop, with your view of the EMH? The fundamentals can't have changed that much. If they did change that much, and the market absorbed new information, then the price wouldn't have come back. The only way you can retain a belief that the price is "correct" is by imagining there are invisible error bars somewhat bigger than the size of the fluctuation.