What market efficiency does not imply:
Efficient Market Hypothesis - EMH - Investopedia
The financial crisis has led , a prominent judge, University of Chicago law professor, and innovator in the field of Law and Economics, to back away from the hypothesis and express some degree of belief in . Posner accused some of his colleagues of being "asleep at the switch", saying that "the movement to deregulate the financial industry went too far by exaggerating the resilience—the self healing powers—of laissez-faire capitalism." Others, such as himself, said that the hypothesis held up well during the crisis and that the markets were a casualty of the recession, not the cause of it. Despite this, Fama has conceded that "poorly informed investors could theoretically lead the market astray" and that stock prices could become "somewhat irrational" as a result.
Financial market efficiency - Wikipedia
At the International Organization of Securities Commissions annual conference, held in June 2009, the hypothesis took center stage. , the chief economics commentator for the , dismissed the hypothesis as being a useless way to examine how markets function in reality. , managing director of , was less extreme in his criticism, saying that the hypothesis had not failed, but was "seriously flawed" in its neglect of human nature.
What is Efficient Market Theory? definition and meaning
Investors and researchers have disputed the efficient-market hypothesis both empirically and theoretically. attribute the imperfections in financial markets to a combination of such as , overreaction, representative bias, , and various other predictable human errors in reasoning and information processing. These have been researched by psychologists such as , , , and . These errors in reasoning lead most investors to avoid value stocks and buy at expensive prices, which allow those who reason correctly to profit from bargains in neglected and the selling of growth stocks.
The Efficient Markets Hypothesis - Marginal REVOLUTION
In strong-form efficiency, share prices reflect all information, public and private, and no one can earn excess returns. If there are legal barriers to private information becoming public, as with insider trading laws, strong-form efficiency is impossible, except in the case where the laws are universally ignored. To test for strong-form efficiency, a market needs to exist where investors cannot consistently earn excess returns over a long period of time. Even if some money managers are consistently observed to beat the market, no refutation even of strong-form efficiency follows: with hundreds of thousands of fund managers worldwide, even a normal distribution of returns (as efficiency predicts) should be expected to produce a few dozen "star" performers.