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The efficient market hypothesis doesn't say anything about the amount of time it might take for markets to iron out inconsistencies and take into account new in
by whoisburbansky 6y ago
The efficient market hypothesis doesn't say anything about the amount of time it might take for markets to iron out inconsistencies and take into account new information; "the market can remain irrational longer than you can stay solvent." It's the sort of thing that's hard to falsify because you can always say "oh, it'll eventually become consistent." Given that, I don't think this fundamentally changes anything about "technicals," even if P!=NP, but my intuition a priori is also the same as yours, that "technicals" are mostly window dressing anyways.
- na85 6y ago>The efficient market hypothesis doesn't say anything about the amount of time it might take for markets to iron out inconsistencies and take into account new information Actually it does. The central premise of the Efficient Market Hypothesis is that all relevant information is already priced in. >"the market can remain irrational longer than you can stay solvent." Irrational behaviour by uninformed investors is theoretically already priced in, if the market is efficient.
- whoisburbansky 6y agoTaking that literally, it's clearly false; information can't affect prices faster than the speed of light.
- na85 6y agoAh yes the good ol' HN pedantry. Please go actually read the hypothesis and understand its central tenets.
- jabl 6y agoAh, but here's an interesting topic for an ambitious research project, "Efficient relativistic markets". The proposal would score cross-disciplinarity brownie points in the evaluation committee.
- hchasestevens 6y agoYou might be surprised to learn that the well-known economist Paul Krugman wrote in the late 70s about trade in relativistic scenarios, see https://en.wikipedia.org/wiki/The_Theory_of_Interstellar_Trade https://en.wikipedia.org/wiki/The_Theory_of_Interstellar_Tra... and http://www.standupeconomist.com/pdf/misc/interstellar.pdf http://www.standupeconomist.com/pdf/misc/interstellar.pdf (for the paper itself).
- jabl 6y agoAh, but of course. When you're not a subject matter expert what you think is a novel idea is something the actual experts have already investigated decades ago. sigh, oh well.
- bawolff 6y agoWe're literally talking about a paper comparing emh to np=p, isn't pointless pedantry the name of the game?
- rocqua 6y agoI mean, in that sense the efficient market theory is immediately false, since someone must be the first to learn some new information and price it in. Thing is, the hypothesis can be useful whilst being only approximately true. If it is true to with 0.1% then, in most cases, it is quite appropriate to model it as being perfectly true. And obviously, there are other cases where that model isn't useful. In those cases, it would probably still be useful to take the 0.1% number into account.