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The only way I can understand the Efficient Markets Hypothesis is as a way for academic economists to explain why they personally have not gotten rich trading s
by ProjectArcturis 4y ago
The only way I can understand the Efficient Markets Hypothesis is as a way for academic economists to explain why they personally have not gotten rich trading stocks.
- mikeyouse 4y agoIf you’re actually curious about the EMH, you should really read something deeper than non-finance people paraphrasing it poorly.
- zomglings 4y agoCan you please cite some of these references?
- mikeyouse 4y agoIt's a really approachable theory and contrary to what you'll read in tech message boards - doesn't remotely boil down to "the market can't be wrong". Burton Malkiel (economist most famous for writing "A Random Walk Down Wall St" and being a longtime advisor of Vanguard) has a paper talking about the early 2000's pushback. It gives a good summation / spells out some critiques / offers his reasons for disagreeing: https://www.princeton.edu/~ceps/workingpapers/91malkiel.pdf https://www.princeton.edu/~ceps/workingpapers/91malkiel.pdf
- zomglings 4y agoThank you very much
- smabie 4y agoFinance people (well, the ones that actually make money trading) don't put much stock in EMH either..
- mikeyouse 4y agoI assume you mean they don’t put much stock in the strong EMH - Which is true, but the concept is the underpinning of most risk-weighted investing and some form of it (eg weak or semi-strong EMH) lines up nicely with why index funds outperform on a very broad basis. I’m trying to think of a good analogy to CS.. maybe “Good engineers don’t put much stock in artificial intelligence”