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If we assumed efficient markets the price of oil would never change.
by simonh 4y ago
If we assumed efficient markets the price of oil would never change.
- endisneigh 4y agoHow so?
- simonh 4y agoBecause all future risks, including the ones under discussion, would already be priced in. Obviously that can’t be true because not all risks can be anticipated accurately in advance, but that includes things like government strategic reserve changes that may or may not happen depending on all sorts of other factors.
- endisneigh 4y agoFuture risks being priced in doesn’t mean the price never changes though.
- benj111 4y agoso if a new ic car is built and sold the price wouldnt change? if a new ev is built and sold the price wouldnt change? if a new oil reserve is found the price wouldnt change? if a storm happens and knocks a refinery out of action the price wouldnt change? efficient markets != perfect foresight.
- simonh 4y agoOf course, it’s absurd. That’s what I was pointing out. Prices do change, so obviously markets are not perfectly efficient, and in fact can’t be including for the reasons you give.
- sixstringtheory 4y agoYou can ignore everything else parent said and focus on this: > efficient markets != perfect foresight “Efficient market” refers to the speed and proportion of the reaction to new information as it is discovered.
- simonh 4y agoThat's a perfectly fine definition, but the post I was relying to was not taking that into account. It was suggesting that in a perfect market the possibility that maybe a certain course of action might be followed, that this must be priced in. If you follow that logic, then in perfect markets prices should never change. The problem is it's flawed logic because uncertainties cannot be priced in.