
Moderator: Founder of Hocomania
hocus wrote:
I do not see it as possible for the market to be a random walk and an efficient market at the same time. I see these two terms as antonyms, not synonyms. Something that is "randon" is not "efficient" and something that is "efficient" is not "random." ?
martingale wrote:
Well, then that is simply a limit on your understanding, I'm afraid. If a market is efficient then by definition any new information is completely unexpected and therefore pseudo-random.
If VII is really just the value effect and/or the momentum effect, that's a fairly serious criticism of it, as it could be cheaper in that case simply to follow one of those strategies instead (eg: buy and hold value stocks). It would also imply that you are not getting any free lunch if, as many have argued, there are rational reasons why value and momentum investing have higher returns than the market average. To wit, they are perhaps riskier.
I would think that you need to spend some time establishing that it's NOT just one of those other effects, fleshing out the fundamental reasons for it, and not simply resorting to "I believe".
I have an article at my site entitled "What's Faith Got to Do, Got to Do With It?" This really does come down to "I believe" in the end. I think that's so on both sides.
I have mounds and mounds and mounds of evidence. Advocates of EMT have mounds and mounds and mounds of evidence too. The differences are differences in how we interpret the evidence.
If you talk to people who believe in God, they see evidence that God exists in everything they look at. If you talk to people who do not believe in God, they see evidence that God does not exist in everything they look at.
The starting-point premise is critical. If you believe that the market is efficient, you can see evidence of that in the data. If you believe that valuations matter, you can see evidence of that in the data.
People have been discussing this basic issue since the first market opened for business. Things swing in one direction or the other from time to time. I don't believe that the question will ever be entirely resolved one way or the other until the end of time.
Rob
Since this thread is now moving into the area of investing as a faith based exercise, it has been moved to Soapbox.
Carry on.
hocus wrote:EMT will go down in the first secular bear market to come along since it became widely popular (we are now in Year Eight).
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