3 ms·

Lots of comments here are related to "efficient" and "market", but completely unrelated to the "efficient-market hypothesis"[1]. The efficent-market hypothesis

Lots of comments here are related to "efficient" and "market", but completely unrelated to the "efficient-market hypothesis"[1]. The efficent-market hypothesis is not general supposition that for example all markets are efficient by all definitions, nor that free-market capitalism is efficient. It's a specific hypothsis the prices of financial assets like stocks represent the true expected value[2] of the assets, including when accounting for future retuns. The supposed mechanism driving the property is that finacial asset markets are effectively servo systems[3]; traders trade based on any measureable information and act as feedback which drives prices to the expected values, so any other variables which may affect prices are therefore unmeasurable. Personally, it seems clear to me the hypothesis is literally false. Someone has to have the most actionable information or be the best at measuring. On the other hand, it seems clear that it's practically true for almost all people. The chance that any given person can measure an asset's true value the best is practically negligible. I certainly don't believe I can beat the market. [1]: https://en.wikipedia.org/wiki/Efficient-market_hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis [2]: https://en.wikipedia.org/wiki/Expected_value https://en.wikipedia.org/wiki/Expected_value [3]: https://en.wikipedia.org/wiki/Servomechanism https://en.wikipedia.org/wiki/Servomechanism

TeaBrain 2y ago
Robert Shiller, who had long been one of the most vocal critics of the efficient market hypothesis and the idea of efficient markets, shared the Nobel Prize in economics alongside Eugene Fama in 2013. Shiller is also well known for the Case-Shiller Home Price Index. https://www.nobelprize.org/prizes/economic-sciences/2013/summary/ https://www.nobelprize.org/prizes/economic-sciences/2013/sum...
creer 2y ago
> I certainly don't believe I can beat the market I was with you until this step. That markets are not close to efficient (in the sense of EMH) seems right to me. BUT it does not follow that because of that anyone should be able to beat the market. There is a huge gap between EMH being far from reality (or simply not close) - and that gap being exploitable. (Or more generally, non-EMH doesn't say much as to whether or how things should be exploitable.) For one thing we humans are humans, report to humans, get our news from humans, share this market with humans, etc, and the ones of us who pay attention know how hard it is to account for that.

TeaBrain 2y ago

Robert Shiller, who had long been one of the most vocal critics of the efficient market hypothesis and the idea of efficient markets, shared the Nobel Prize in economics alongside Eugene Fama in 2013. Shiller is also well known for the Case-Shiller Home Price Index. https://www.nobelprize.org/prizes/economic-sciences/2013/summary/ https://www.nobelprize.org/prizes/economic-sciences/2013/sum...

creer 2y ago

> I certainly don't believe I can beat the market I was with you until this step. That markets are not close to efficient (in the sense of EMH) seems right to me. BUT it does not follow that because of that anyone should be able to beat the market. There is a huge gap between EMH being far from reality (or simply not close) - and that gap being exploitable. (Or more generally, non-EMH doesn't say much as to whether or how things should be exploitable.) For one thing we humans are humans, report to humans, get our news from humans, share this market with humans, etc, and the ones of us who pay attention know how hard it is to account for that.