6 ms·

If you feel that the EMH is wrong to the degree that you're implying, you should go trade stocks on the valuable alpha that you apparently have.

pencilguin 4y ago
"The market can remain irrational longer than you can remain solvent." Irrational is contrary to efficient.
- aetherson 4y ago
  I know this is old now, but there are two possible answers here: 1. If you mean, "the market will not in fact go to the stock price that I think is correct in a time window that anyone can remain solvent for and perhaps ever," then what you are saying is you believe the EMH. 2. If you are instead saying that you are a small fish and big fish could play this scheme successfully, absorbing relatively small fluctuations, then, I mean, go pitch Jane Street in your brilliant approach of "look at the financials." (Obviously, you won't get anywhere because, spoiler warning, they already do this, and it's priced in).
  - pencilguin 4y ago
    Your conclusion in (1) does not follow. You don't know how long the price of (e.g.) NRGV will be irrationally inflated, so you cannot afford to bet on when it will collapse. Your conclusion in (2) does not follow. Jane Street works on a time scale of, at most, milliseconds. We may be sure that Berkshire Hathaway, which does operate on longer time scales, holds no NRGV shares.
    - aetherson 4y ago
      Sure, Jane Street was the wrong example. A hedge fund, or as you say Berkshire Hathaway. But the point is, if you think that someone with deep pockets and somewhat long time horizons can reliably make money just by reading the publicly available financial information and making ordinary insurance from it, why aren't they? And I think the answer that is confident with reality is, "actually, they do, and price in that information, such that there's no alpha left from it. Perhaps people with particular knowledge and expertise can synthesize that information with other knowledge to make useful predictions, but for an average layperson, is priced in."

pencilguin 4y ago

"The market can remain irrational longer than you can remain solvent." Irrational is contrary to efficient.

aetherson 4y ago
I know this is old now, but there are two possible answers here: 1. If you mean, "the market will not in fact go to the stock price that I think is correct in a time window that anyone can remain solvent for and perhaps ever," then what you are saying is you believe the EMH. 2. If you are instead saying that you are a small fish and big fish could play this scheme successfully, absorbing relatively small fluctuations, then, I mean, go pitch Jane Street in your brilliant approach of "look at the financials." (Obviously, you won't get anywhere because, spoiler warning, they already do this, and it's priced in).
- pencilguin 4y ago
  Your conclusion in (1) does not follow. You don't know how long the price of (e.g.) NRGV will be irrationally inflated, so you cannot afford to bet on when it will collapse. Your conclusion in (2) does not follow. Jane Street works on a time scale of, at most, milliseconds. We may be sure that Berkshire Hathaway, which does operate on longer time scales, holds no NRGV shares.
  - aetherson 4y ago
    Sure, Jane Street was the wrong example. A hedge fund, or as you say Berkshire Hathaway. But the point is, if you think that someone with deep pockets and somewhat long time horizons can reliably make money just by reading the publicly available financial information and making ordinary insurance from it, why aren't they? And I think the answer that is confident with reality is, "actually, they do, and price in that information, such that there's no alpha left from it. Perhaps people with particular knowledge and expertise can synthesize that information with other knowledge to make useful predictions, but for an average layperson, is priced in."