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You are empirically wrong. Please, quantify your idea and go backtest it on the stock market. The efficient-market hypothesis does not have an asterisk excludi
by bdr 14y ago
You are empirically wrong. Please, quantify your idea and go backtest it on the stock market.
The efficient-market hypothesis does not have an asterisk excluding cryptocurrencies.
- phyalow 14y agothe efficient market is dead and always has been.
- derleth 14y ago> the efficient market is dead and always has been. This is what people mean when they say "efficient market" in this context: > In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made. http://en.wikipedia.org/wiki/Efficient-market_hypothesis http://en.wikipedia.org/wiki/Efficient-market_hypothesis There are variations of this hypothesis, so saying "it's dead" is meaningless unless you specify which one is "dead" and how it has failed.
- Retric 14y agoThere are generally arbitration opertunity's that offer short term rewards well beyond the standard risk reward curve. Which is how many algorithmic traders consistently return high double digit returns with ought leverage. The simplest being having a mix of buy and sell orders that straddle the average.
- tatsuke95 14y agoWhich is exactly what the hypothesis says. Assume that others are using arbitrage to reduce your opportunities, leaving you with an efficient market.
- Retric 14y agoExcept arbitration requires more than just money + information, people doing arbitration must have low fees / latency for example so it's not available to all players in the market. Net result real world markets are not efficient due to various access levels. Also: Empirical analyses have consistently found problems with the efficient-market hypothesis, the most consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or book value) outperform other stocks. Which is presumably due to cognitive bias. http://en.wikipedia.org/wiki/Efficient-market_hypothesis http://en.wikipedia.org/wiki/Efficient-market_hypothesis PS: It's a reasonable simplification that's useful for the average investor, but not policy makers for example.
- lotyrin 14y agoSo... going up super-exponentially is efficient-market, but a crash is an attack? Is that what I'm hearing? Truly, the capacity for people to employ cognitive bias is staggering.
- brazzy 14y agoQuantification: "An asset whose price has doubled several times, with the time between doublings growing shorter and having reached less than a week, will see an abrupt correction to less than 50% of the peak value within 10 days. I think you'll find that I'm empirically right.