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If the Efficient-market Hypothesis was true, it would not be rational to buy (or sell), any stock, commodity, currency or other investment vehicle as an investm
by PaulRobinson 2y ago
If the Efficient-market Hypothesis was true, it would not be rational to buy (or sell), any stock, commodity, currency or other investment vehicle as an investment alone. Yet plenty of professionals and amateurs do, and many make a profit, which suggest the hypothesis is not provably true.
One way to think of trading is you're kind of in a ponzi scheme. Not an illegal one, but you're buying stock today you're hoping somebody else will buy off you at a higher price one day in the future. If you short a position, you're hoping that somebody will sell you stock at a lower price than it is today for some reason.
All of this suggests to me that markets are not the perfectly rational machines people insist they are. Sure, most people would do better to buy and hold indexes than to time trades on individual stocks (by a long margin), but the argument that all value is priced in all of the time is just daft.
- GrantMoyer 2y ago> If the Efficient-market Hypothesis was true, it would not be rational to buy (or sell), any stock, commodity, currency or other investment vehicle as an investment alone. This is not an implication of the efficient-market hypothesis. The efficient-market hypothesis implies no investment strategy can have expected returns greater than the total market, but says nothing about what the returns of the total market actually are.
- PaulRobinson 2y agoIf you don't have expcted returns greater than the total market, you should not trade. Your argument seems to be "yeah, assume there is no value or edge, and let's just hope for variance in our favour" is what the majority of professional traders, funds, quants, and so on are all doing. If that isn't what you meant, I'd be interested in how you clarify it: what do you think they're doing, and why?