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Efficient Market Theory is dead because it is unfalsifiable. It is not capable of being proved false, and should be discarded for that reason. Information asy

Efficient Market Theory is dead because it is unfalsifiable. It is not capable of being proved false, and should be discarded for that reason. Information asymmetries exist, not everyone with better information have the access to capital or risk profile to alter the market price of an asset.

s1artibartfast 6y ago
Does information or performance asymmetry disprove the theory?
- vmception 6y ago
  assets can be mispriced, efficient market theory requires stretching the logic to fit the theory. it requires a moving the goal post of to a longer and unspecific time frame to say that someone's outsized gains now are irrelevant, it requires moving the goal post to a greater unspecific amount of capital to say they can't beat the performance of the benchmark. anyone in any hard science will point out that the theory is unfalsifiable so pick a different theory. why are we making exceptions for economic and financial theories at all?
aaron695 6y ago
Your first two sentences are very interesting. > Information asymmetries exist, not everyone with better information have the access to capital or risk profile to alter the market price of an asset. This is talked about in the article and seems to just start an argument again and not explain the unfalsifiable statement.
- vmception 6y ago
  Sorry if that weakens the argument to you. It is a separate thought. My point is that "asset pricing" theories are too reductive, and should at least factor in undercapitalized people that do not wish to speculate that can perceive information. Or just abandon reductive asset pricing theories and focus on other things. Promote liquidity and increases in transactions, "efficiency" in that context, not "efficiency" in a "it already is and has been all the time and forever" context.
  - aaron695 6y ago
    I think it's like the Shinichi Mochizuki mathematical proof. If they can't play the game are they really part of it? How do you know if you perceive true information? I can tell you Magic Leap is a BS company and won't make any actual money. But so can lots of people. So is that 'information', the answer is no. Real information is when it will fail.
    - vmception 6y ago
      and that mathematical proof is much more sound than an economist's Efficient Market Theory. QED.

s1artibartfast 6y ago

Does information or performance asymmetry disprove the theory?

vmception 6y ago
assets can be mispriced, efficient market theory requires stretching the logic to fit the theory. it requires a moving the goal post of to a longer and unspecific time frame to say that someone's outsized gains now are irrelevant, it requires moving the goal post to a greater unspecific amount of capital to say they can't beat the performance of the benchmark. anyone in any hard science will point out that the theory is unfalsifiable so pick a different theory. why are we making exceptions for economic and financial theories at all?

aaron695 6y ago

Your first two sentences are very interesting. > Information asymmetries exist, not everyone with better information have the access to capital or risk profile to alter the market price of an asset. This is talked about in the article and seems to just start an argument again and not explain the unfalsifiable statement.

vmception 6y ago
Sorry if that weakens the argument to you. It is a separate thought. My point is that "asset pricing" theories are too reductive, and should at least factor in undercapitalized people that do not wish to speculate that can perceive information. Or just abandon reductive asset pricing theories and focus on other things. Promote liquidity and increases in transactions, "efficiency" in that context, not "efficiency" in a "it already is and has been all the time and forever" context.
- aaron695 6y ago
  I think it's like the Shinichi Mochizuki mathematical proof. If they can't play the game are they really part of it? How do you know if you perceive true information? I can tell you Magic Leap is a BS company and won't make any actual money. But so can lots of people. So is that 'information', the answer is no. Real information is when it will fail.
  - vmception 6y ago
    and that mathematical proof is much more sound than an economist's Efficient Market Theory. QED.