Re:Money, Money, Money (and Investing) (2015)
by chii on Sunday December 25, 2022 @06:10AM
(#34126204)
that's why the EMH is just a hypothesis, and not a truth or fact. And even in the theory, they don't claim perfect efficiency - just nearly perfect. Some people obtain mispricings, take advantage of it, but in the process, push that efficiency up just a tid bit more.
Two economics professors walk down a campus street, discussing the efficient markets hypothesis. One of them exclaims:
— Look, there's something green down there on the pavement; looks very much like a $20 bill!
— Nope, — answers the other, — it can't be. If that were indeed a $20 bill, somebody would have picked it up already!
The efficient market hypothesis postulates some kind of a static equilibrium. The reality is not static, and the processes that lead to a new equilibrium are neither instant nor independent of subject area knowledge. Due to this, during that last year's bull market, I made a ton of upside on stocks where I understood the business and could make sense of obscure tech news, and nearly nothing on stocks that otherwise seemed like winners and were recommended by likes of fool.com.