4 ms·
Saying that the efficient market hypothesis is false is like saying that the principle of entropy is false because you can heat a pot of water on your stove. Th
by tokenadult 12y ago
Saying that the efficient market hypothesis is false is like saying that the principle of entropy is false because you can heat a pot of water on your stove. The efficient market hypothesis as a long-term, general phenomenon is consistent with short-term, local arbitrage and other examples of information asymmetry in markets.
P.S. The blog from which this submission comes bears the usual signs of hype exceeding performance. The author's firm was established in 2008, which means it
1) doesn't really have a very long-term record,
and
2) what record it does have was established during a recovery from a worldwide financial shock and depression, an atypical period during my lifetime.
- reduce 12y agoIn the long term, all stocks become worthless and the heat death of the universe occurs. If you can't state a particular time period over which a finance model's prediction should be valid, then you haven't actually made any prediction at all.
- Guvante 12y agoThe main point of the efficient market hypothesis is that the average investor won't consistently beat the market average. Also note that most of the people beating the efficient market hypothesis aren't doing the kinds of transactions they are being compared to. Can you really compare moves like bailing out Coca Cola to buying and selling stocks based on market estimates you derive?
- jbooth 12y agoIf the efficient market hypothesis is confounded by moves like bailing out Coca Cola, what good is it?
- infinite8s 12y agoThe efficient market hypothesis presumes that you can't affect the performance of the market (except possibly the shirt term price action). Bailing out Coca Cola presumably entails gaining enough control to drive the future directin of the company.
- DannyBee 12y agoThe efficient market hypothesis is also equivalent to the problem of whether P=NP, which to me, is more evidence as to it's likely truth value than this blog :)