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The author makes the mistake of equating efficient markets with rational markets. The market is not rational (whatever that means) but rather efficient. All k
by pragmatic 18y ago
The author makes the mistake of equating efficient markets with rational markets. The market is not rational (whatever that means) but rather efficient. All known information (whether it is correct or not) is reflected in the price of a security.
Rational markets lead us to the communist/central planning trap. If the market can be shown to not be "rational" the government can assume control (nationalize) of the market.
Does the weather/climate appear "rational" on a large scale? No of course not. It consists of the local weather at each measurable point on the planet. Assuming we can make systems "rational" is plain foolish.
See "The Systems Bible" by John Gall.
- create_account 18y agoThe market is not rational (whatever that means) but rather efficient. Oh boy. Careful to whom you say that.
- steveplace 18y agoAll known information (whether it is correct or not) is reflected in the price of a security. Eventually, yes. But not intermediate to short term. EMT removes subjectivity of information. People perceive (or fail to) certain data differently than others. The market is a collection of that perception combined with uncertainty. To ignore that fact is not practical over the short term. Evidence: see the premarket futures today.