What do you think about the Efficient Market Hypothesis?

What do you think about the Efficient Market Hypothesis?

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people here dont even know what it is... regarding actual knowledge in finance Jow Forums is full of normies with absolutely no clue

fap...fap...fap...

Its mostly bunk, at least the perfect and the semi-perfect version. Fama did a good job convincing everybody of its validity, so much so that academia was fooled for over a decade until behavioural models found a million inconsistencies that diverge from the "prices carry no premium information" assumption. Late 90s saw some groundbreaking papers further disproving this assumption (see Hirschleifer et al., Hong and Stein, Barberis). Now in academia and minor finance the full imperfect version is still widely subscribed to (and so are various associated assumptions like the GBM), but with what rentech is doing and heavy money being invested into decomposition methods I assume its mostly bunk as well. Things like momentum are still referred to as "anomalies", however what kind of anomaly is it when its pretty much found everywhere you look (especially in forward derivatives). All of that said, if you use TA alone then yeah, you are not gonna extract much from prices alone.

t. former quant

rare to meet someone who atleast can cite some people in that field. didnt know those people exist here.

one internet for that alone

i think the strong efficiency hypothesis was never really regarded to hold. it was just the next logiacl level to look into since otherwise it would be incomplete.

regarding the semistrong efficiency i believe it strongly holds for everyone who isnt involved in huge coorperations with money to spend to monitor information. its just not possible in my opinion for one person to evaluate information in a way for it to give you any systematic return.

for the weak form efficiency i think its quite the oppsotie as for the strong one... no one really doubts it holds

that being said and in the context of this board i would say the efficient market hypothesis holds since i really doubt anyone here has the capital to process information in such a way that its profitable and also that anyone is a true insider who can manipulate volume to maybe trigger stop loss orders or margin calls etc...

how did you end up on Jow Forums

>however what kind of anomaly is it when its pretty much found everywhere you look
the problem here is not that it does not exist but its hard to pinpoint beforehand

afterwards its always easy to fit momentum and trends into a graph. the problem is to precisely tell where it is right at the moment and where it will be in he near future

Mostly I think there is no perfect version. For instance, upon closer examination your example is extremely topheavy and likely to topple any second.

Long term it holds its water, although it's nothing revolutionary, it's just extending on theories of marginal utility value.

However it would seem that events, news, black swans, etc are not factored in that well, making it not apply to short term value adjustments.

event studies show that sudden events are priced in pretty fast or atleast fast enough for non insiders to not be able to react to it in a profitable manner

economis taught to dumb babies in uni is a jokkkke. our central bank jews have pulled the strings to steal as much as possible for 100 years, they dont teach that at uni. Kill them all

>Efficient Market Hypothesis

Reproduction of capital occurs by a set of schema, where productive consumption (Means of production) are produced and in which consumer goods are produced.

In an abstract academic sense, Efficent Market Hypothesis actually works the economy should be able to achieve an equilibrium, but this equilibrian can only be achieve on the basis that producers keep reinvesting profits into new productive consumption. This produces contains though inherent contradictions, any "equilibrium" would be inherently unstable only extremely temporary since new productive consumption that are created are then used to create more commodities which in turn must find a market in order to be sold and for profit to be realised.

>“Each time we secure today’s equilibrium by increased investment we are aggravating the difficulty of securing equilibrium tomorrow.” Keynes.

Also historically Capitalism does not progress smoothly, it lurches from one crisis to another.
Imbalances between production and consumption along with an expanding production and limits of the market resulting from productive forces. Just by looking at the history of our economic system over the past 100 years should debunk the basis of Efficient Market Hypothesis in itself.

>economics
efficient market hypothesis is not economics its finance you dipshit

It's a load of shit. Markets don't magically have all conceivable information just priced in, participants have varying amounts of information and ability to exploit said information - and don't always react in a rational fashion. It also fails to take overt manipulation into account.

Economics is wank OP. Like most university bullshit these days. It shouldn't be, but it is.

why is her bra being help together by tape?

link memes what else? good break from my regular day to day number crunching shit and willmott and associated forums.
I mean yeah you are mostly correct. I was really referring to the theoretical basis of it all. And the perfect version was THE theory until behavioral science came along. You couldn't publish anything even remotely close to challenging it in the mid 70s. Read fama's original paper, its very well put together to say the least and academia loves this shit. Something that seemingly explains reality in a succinct manner...
Now how all of this plays out in practice, even back then, you are very much correct. Even today, as you point out, for all intents and purposes even the strong version holds, because people lack everything necessary to exploit any form of anomaly from prices alone.
About momentum, you'll be surprised, for example:
> risk.net/awards/5368836/quant-hedge-fund-of-the-year-man-ahl
the problem is, nobody in their right mind will ever talk about it. Also academics and non-practitioners are waaay behind. The way most papers do ML in finance is fucking ridiculous and most of it should be dismissed outright

Well fucking put. /thread

Well, somebody has to buy first after big bullish news breaks so I think that's bunk.

wow, it's Shay Laren in the pic, used to fap on her so hard like 12 years ago when I was a teen

>Also academics and non-practitioners are
waaay behind
not refering to the article now since i didnt read it yet but in general i think its obvious that academics is behind there

quantitative analysis cost a shitton of money... its kind of an armory race on who has the better software and who can process more information with it while the more that are able to do that reasonable well the less it works

therefore nobody wants to give academics access to it since they usually dont care about returns but only about testing its limits and whatnot to write papers about it

it would be the same if i have an arbbot that gives me good returns and then would give universities access to it to do test shit... that bot would be useless pretty fast

sure but the one who does that systematically is an insider who has the information just a little bit earlier than your average gambler (you call the trader)

just read up on some of the event studies who investigated exactly how things took place when big news (good or bad) were released

>Also historically Capitalism does not progress smoothly, it lurches from one crisis to another.
>Imbalances between production and consumption along with an expanding production and limits of the market resulting from productive forces. Just by looking at the history of our economic system over the past 100 years should debunk the basis of Efficient Market Hypothesis in itself.
this doesn't actually disprove the EMH since its not about market efficiency on the macro level. EMH proponents would simply state that since market price -> true reflection of value, a bubble, etc is just a change in fundamental expectations. Not that you are incorrect in general.

>Also historically Capitalism does not progress smoothly, it lurches from one crisis to another.

Monetary policies, interest rates, taxes and licensing tend to affect business cycles so I don't think this can be described as an inherent Capitalism phenomenon.

Markets are inefficient in the short run but efficient in the long run. No need to complicate it or make it black and white

T. Investment banker

Wtf a decent thread on biz, now ive seen everything

How much link you got?

>the problem is to precisely tell where it is right at the moment and where it will be in he near future
Trends are made by the participants. The participants are not going to tell you what they are going to do until they actually do it. In fact, they don't even know what they're going to do until they do it.

The MTH isn't disproved by the unpredictability of trends and momentum, it's disproved by the fact participants aren't going to behave in prescribed patterns.

I really mean "way behind" in non-obvious ways. It obviously goes without saying that nobody will share anything of production value with anybody, let alone some boring fucks in academia. I'm really referring to some fundamental misunderstandings of working market microstructure in literature and academia. And this is rare. Practitioners and theory diverge in many other fields, but not on this same level. Pick up any ML in finance paper and the mistakes being made are glaring. The assumptions all wrong. For example, the fact that 99% of literature samples prices on a time scale (lets say a 15min intervals), then builds features out of those, then predicts on a time horizon (so in other words you are sampling a stochastic process on a time scale) is so fucking wrong its ridiculous. Even actual hedge funds do the same mistake and end up losing money. And thats just one mistake of many fundamental mistakes. Don't even get me started on backtesting, cross validation, etc. No other industry I believe is as secretive to what is required on a very fundamental level as finance.

That guy is a Marxist, when he talks about Capitalism he is talking about "really existing capitalism", not some hypothetical system of "free trade". This is in fact the original sense in which the word capitalism was used.