A Little More Today than Yesterday! Trading Stuff.
There Are Conceptual Limits to Efficient Markets
David Merkel submits:
I do and don’t believe in the efficient markets hypothesis [EMH]. I do believe in the adaptive markets hypothesis [AMH]. The efficient markets hypothesis posits that:
- Past public information can’t be used to obtain better-than-average returns. (weak form of the EMH — cuts against technicians)
- Past and present public information can’t be used to obtain better-than-average returns. (semi-strong form of the EMH — cuts against fundamental analysis)
- Public and private information can’t be used to obtain better-than-average returns. (strong form of the EMH — believed by few)
In practice, the academic community holds to the semi-strong form, while the investment community holds to the weak form. One thing is certain: the market is dominated by large institutions, and the market on the whole, less fees, cannot beat the returns of the market on the whole.
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