> This can all be proven by something called the efficient market hypothesis. Of course, the efficient market hypothesis is basically an unproven assumption.

> This can all be proven by something called the efficient market hypothesis. Of course, the efficient market hypothesis is basically an unproven assumption. The general gist of it is obviously somewhat reasonable, but you have to be extremely careful what kind of statements you really believe. Just to make two obvious examples: the strongest form of EMH claims that asset prices reflect even hidden information. That cannot possibly be true, because the circle of people with access to that hidden information most likely does not have enough money / market power to affect a shift of sufficient size. The other example: slightly weaker forms of EMH still claim that prices adjust immediately to new information. That cannot possibly be true either, because traders simply aren't that fast. HFTs typically cannot afford to put so much money into affecting big price shifts, and other traders are slower. Besides, it's clearly falsified empirically: if this form of the EMH were true, stock prices would look like step functions, and they don't. Another argument against EMH is complexity theoretic: one can most likely show that if EMH were true, the market would solve NP-hard problems efficiently (I remember seeing a line of work that attempted to show such a thing, though obviously the modeling is very messy). Now you might argue that EMH still somehow approximates the real world. Maybe. But small errors can add up, so you have to be really careful in your thinking.