3 ms·
That is predicated on the rational market hypothesis: that all agents have perfect information, make perfectly rational decision, there is no market friction, a
by andrepd 4y ago
That is predicated on the rational market hypothesis: that all agents have perfect information, make perfectly rational decision, there is no market friction, and goods are perfectly elastic. Of course, neither of these assumptions are true in this case.
Back in the real world, we can look at hard data. Margins for energy producers and retailers have increased massively in the latest quarter. Also, we know that markets don't react directly (and exclusively) to fundamentals. They react to panics, they react to extremely complex interactions of manual and automatic trading algorithms. Reality is far from the simple "supply and demand" that economics 101 textbooks portray.
- vorpalhex 4y ago1. You mean the efficient market hypothesis? 2. That does not apply here since we are talking cost/profit and not share price > The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a hypothesis that states that share prices reflect all information and consistent alpha generation is impossible. Nothing you say is about EMH. Nor does EMH predict that markets react only to "fundamentals", only in that shares reflect the whole set of information.