In 1980 Sanford Grossman and Joseph Stiglitz, another subsequent winner of a Nobel prize, pointed out a paradox. If prices reflect all information, then there is no gain from going to the trouble of gathering it, so no one will. A little inefficiency is necessary to give informed investors an incentive to drive prices towards efficiency. For Mr Scholes, it is the belief that markets tend to return prices to their efficient equilibrium when they move away from it that gives the EMH its continuing relevance.
An ‘efficient’ market is defined as a market where there are large numbers of rational, profit ‘maximisers’ actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants. In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future. In other words, in an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value.
Efficient market hypothesis and forecasting - …
Any information relating to anarchists should be reported to your local police. , 2011
Market Anarchism is the doctrine that the legislative, adjudicative, and protective functions unjustly and inefficiently monopolised by the coercive State should be entirely turned over to the voluntary, consensual forces of market society.
Research is central to the monetary policy framework
If a market is strong-form efficient, the current market price is the best available unbiased predictor of a fair price, having regard to all relevant information, whether the information is in the public domain or not. As we have seen, this implies that excess returns cannot consistently be achieved even by trading on inside information. This does prompt the interesting observation that must be the first to trade on the inside information and hence make an excess return. Attractive as this line of reasoning may be in theory, it is unfortunately well-nigh impossible to test it in practice with any degree of academic rigour.
Molinari Institute - praxeology
Salernos Forerunners of the Austrian School: The French Liberal School (, )
Mark Thorntons (PDF file)
What is AI (Artificial Intelligence)
If a market is semi-strong efficient, the current market price is the best available unbiased predictor of a fair price, having regard to all publicly available information about the risk and return of an investment. The study of public information (and not just past prices) cannot yield consistent excess returns. This is a somewhat more controversial conclusion than that of the weak-form EMH, because it means that analysis – the systematic study of companies, sectors and the economy at large – cannot produce consistently higher returns than are justified by the risks involved. Such a finding calls into question the relevance and value of a large sector of the financial services industry, namely investment research and analysis.
Behavioral Finance: Background - Investopedia
Smart (2000, 2002b, 2010), Chaisson (2001, 2003) and others have noted that a special subset of our most recently evolved complex systems display accelerating growth in both their computational capabilities and the efficiencies and densities of their physical resource (Space, Time, Energy and Matter, or STEM) inputs to computation.