Kindly Stop Saying The Efficient Market Hypothesis is Dead

There are whispers that the Efficient-Market Hypothesis (EMH) is dead.

Smart people say the EMH may have been the real victim of the coronavirus. These people, or their friends, were able to get ahead of the recent market crash. They sold stocks before the market reacted, or shorted them, or bought ‘put’ options, and made handsome profits.

They beat the market without having any special information! They were reading the same news and reports as everyone else. They made a profit by acting on public information that was right there for anyone to see. And so, the EMH is dead, or dying, or at the very least, has a very nasty cough.

I say this is wishful thinking: rumours of the death of efficient markets are greatly exaggerated.

stockmarket charts: how safe are index funds, anyway?

Beware of Geeks Bearing Formulas

The history of finance is a history of brains dashed on the pavement. The fact that many people tend to be ‘irrationally’ wary of the markets starts to take on a new significance: the suspicious folk-wisdom has often been correct, while the ‘experts’ have consistently been dangerously wrong.

Hence Warren Buffett’s warning: beware of geeks bearing formulas…