Re:Markets are efficient if and only if P=NP (2010)
by refurb on Wednesday October 21, 2020 @08:54AM
(#24847325)
I'm going to throw this out there as an idea (it's probably not new) - I would argue the markets are efficient on a long enough time scale. Yes, stock prices don't always instantaneously reflect true value, but on a long enough time scale, months to years, they do.
The time scale is usually dependent on the transparency of the company's financials to investors. For public companies, the time scale is measured in quarters. For private companies, it could be measured in years or decades.
And this actually lines up with the EMH - stock prices reflects all available information. Nothing about the hypothesis says it reflects the true value when key information is unavailable (e.g. fraud or a private company that doesn't open their books).
The time scale is usually dependent on the transparency of the company's financials to investors. For public companies, the time scale is measured in quarters. For private companies, it could be measured in years or decades.
And this actually lines up with the EMH - stock prices reflects all available information. Nothing about the hypothesis says it reflects the true value when key information is unavailable (e.g. fraud or a private company that doesn't open their books).