I think it is true that it is very hard to beat the market. That can be true without the market being perfectly efficient. The way I see it is that the market is ultra competitive and full of very competent & very rational (not perfectly rational) individuals with a very high incentive to interpret facts correctly. So its not easy to beat the market. You have to be very knowledgeable, and invest very deeply in order to generate insights your competitors dont have. As another commenter mentioned, its not clear to me how economically sensible it is to make this kind of investment.

If you play chess against someone, and you discover a winning strategy, and you play it repeatedly, they'll eventually discover your strategy and be able to counter you. Your opponents in the market are adaptive in this same way, so trying to always stay ahead is very hard. Some funds find some way (which I am not privy to) to succeed at this, and people still make boat loads of money as professional traders or quants, so there is reason to believe it is possible.

The fact that it is possible to have a very successful career in finance as a quant or trader also seems to me like evidence the efficient market hypothesis (taken in its strongest form, that markets are perfectly efficient) is false.

>The fact that it is possible to have a very successful career in finance as a quant or trader also seems to me like evidence the efficient market hypothesis (taken in its strongest form, that markets are perfectly efficient) is false.

It's the opposite. Traders increase market efficiency up to a certain point. If traders didn't exist then markets couldn't be efficient in the first place. Liquidity problems would persist and cause large spreads between buy and sell prices.

This just isn't true that investors don't beat the markets in the long term though. Sure many don't, but there are plenty of examples who do. And really all it takes is one who does to disprove itt.

To be more clear, the statement should have been that on average, they don't. As far as I am aware, this _is_ true, although quite surprising, and not a popular idea among investors. The second part of the argument is interesting. On the one hand, a la Warren Buffet's analogy of thousands of professional coin flippers, it is obvious that a small number will do great, while the average will do average (or slightly worse, because of fees). This does not imply that there are _zero_ people who can consistently and on average outsmart the markets, only that it seems to take more than the median full time, relatively highly trained professional to do so.

I mean the market literally is the average of everybody's position so I would say it's a tautology that the average performance of everyone who participates in a market will equal an index of that market.

But sure you could always define efficiency in an unattainable way by saying no matter how much you beat the market your streak could end down the line and the limited sample size means it doesn't prove anything.

And to me that's what efficient markets are. This unfalsifiable word game you can play where as long as the definition is flexible enough, you get to say the sentence "markets are efficient".

Is warren buffet himself not an example of someone who has been able to consistently generate alpha?

I think this question is hard to comprehend when you blow it up to this massive scale. Heres a simpler (and I claim) equivalent problem.

Imagine you're in a room with a friend. You're both tasked with estimating the price of a company. You both read through the companies 10Ks and whatever other information you can dig up. You read a bit more carefully than your friend, and detect an issue in the company's finances. Now you have alpha, and can develop a better estimate.

The market is this same scenario, but there are millions of folks playing the same game. That means its harder to find that undiscovered blip of insight, but that doesn't mean it doesn't lie in wait for the diligent. Just as there are still original thoughts, there are still original insights, and possessing them means, for a moment, you can beat the market.

>Is warren buffet himself not an example of someone who has been able to consistently generate alpha?

Sure but the exception proves the rule. We don't have a whole generation of Warren Buffets, we only have one.

They might just be statistical outliers. Given infinite time, would any investor beat the market? That's the real question (sticking to the mathematical theory here).

Be careful before holding up a single example as an exception to the rule. Some basic statistical analysis show there was a 30% chance the Red Baron, the most famous WW1 fighter pilot, was just lucky. And obviously his luck eventually ran out.

https://www.scientificamerican.com/article/news-bytes-red-ba...

Or thee might not be. If your burden of proof is that no data is valid because new data might come in that disagrees, then sure it's easy to see why you can't acknowledge that someone has disproved the theory. It also makes the theory unfalsifiable ie meaningless. So we are right back at it not being meaningfully true.