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MB’s thoughts on the Efficient-market hypothesis
Posted on 11/30/20 at 2:48 pm
Posted on 11/30/20 at 2:48 pm
Was doing a little Thanksgiving reading after talking to my brother in law and we got into a discussion about the efficient-market hypothesis. What are the MB’s general thoughts on this as it relates to your personal investing philosophy?
4
Posted on 11/30/20 at 4:41 pm to TigerGrad2011
It's a theory only useful for education purposes
Posted on 11/30/20 at 6:41 pm to TigerGrad2011
It's irrelevant to my personal investing philosophy. There may be opportunities for arbitrage due to technological differences among investor classes, but I'm not positioned to concern myself with it if it exists. Otherwise, it's seems efficient from an information perspective. I haven't studied this in a while because, as I said, it's not important to me.
Posted on 11/30/20 at 6:46 pm to TigerGrad2011
Assumes too many things that are demonstrably false, such as frictionless markets, to have any practical use.
Posted on 11/30/20 at 7:48 pm to TigerGrad2011
Interesting that the first 3 replies state that they don’t believe in the efficient market hypothesis. Interesting because so many people on the board are Vanguard S&P 500 index fund pumpers. (Me included).
But yes, I believe that all public information is reflected in equity prices. That’s why the market adjusts all day while open, investors are trying to value the companies future returns and earnings to relevant news, data, and economic trends.
I think that certain subsets of people can do better with some investment selection because their knowledge of an industry paired with their comfort with the risks within the industry. But broad market arbitrage...I don’t think so.
But yes, I believe that all public information is reflected in equity prices. That’s why the market adjusts all day while open, investors are trying to value the companies future returns and earnings to relevant news, data, and economic trends.
I think that certain subsets of people can do better with some investment selection because their knowledge of an industry paired with their comfort with the risks within the industry. But broad market arbitrage...I don’t think so.
Posted on 11/30/20 at 8:08 pm to AugustaTiger
quote:
Interesting because so many people on the board are Vanguard S&P 500 index fund pumpers.
Oddly enough, the rise of passive is one of the things that has discredited EMH. As I said, EMH assumes markets are frictionless, but passive investments do cause friction, i.e. they result in stocks being indiscriminately bought at the ask which itself can cause markets to become dislocated from fair value, which EMH says isn’t supposed to happen.
ETA: go to this link and search for “the biggest change that happened” and read that segment from Mike Green
LINK
Or read this book:
This post was edited on 11/30/20 at 8:16 pm
Posted on 11/30/20 at 8:43 pm to RedStickBR
I was hoping that book was on sale for Cyber Monday on kindle but it wasn't 
Posted on 11/30/20 at 8:55 pm to AugustaTiger
quote:
Interesting because so many people on the board are Vanguard S&P 500 index fund pumpers.
Have you seen the top 4 holdings thread? This board ain’t your dad’s bogleheads forum.
Posted on 11/30/20 at 9:24 pm to PillPusher
quote:
Have you seen the top 4 holdings thread? This board ain’t your dad’s bogleheads forum.
I was pleasantly surprised by that thread.
Some of the stocks most often listed there are going to make millionaires
at this point it’s a matter of how courageous you are in your positions
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