I just read three articles from The Big Picture about market inefficiency that I found interesting:
- “The kinda-eventually-sorta-mostly-almost Efficient Market Theory” talks about how the father of efficient market hypothesis (EMH), Eugene Fama, has now admitted that “poorly informed investors could theoretically lead the market astray; Stock prices, he noted, could become “somewhat irrational.” This has shift in thinking “has big implications for real-life problems, ranging from the privatization of Social Security to the regulation of financial markets to the way corporate boards are run” according to a quoted Wall Street Journal article.
- “The Hardly Efficient Market” discusses the case of Apple’s (AAPL) stock in the past year. “That’s a perfect example of bad theory costing you money.”
- “The Astonishingly Inefficient Market” looks at Enron as a perfect example of how inefficient the market is. “Where, pray tell, is the efficiency there? The information that Enron was giant fraud was out, and yet the stock took over a year to collapse. Efficient? P’shaw . . . “
3 thoughts on “The Inefficient Market”
Burton Malkiel has an interesting rebuttal in A Random Walk Down Wall Street
That book is definitely on my to-read list. Thanks for reminding me, I will have to read it soon.
You gots it backwards: Random Walk was what started the entire efficient market hypothesis.
This is the rebuttal