Markets aren't efficient; they are made efficient.
Lord | 12.17.07 - 5:01 pm | #

I've read that one as well. It is another of my favorites. I find the EMH / Behavioral debate very interesting.

- Jeff
Jeff V | 12.16.07 - 9:57 am | #

Jeff:
You might want to check out Andrew Lo's paper on the Adaptive Markets Hypothesis. It's on SSRN at
http://papers.ssrn.com/sol3/ pape...tract_id=728864
The Unknown Professor | Homepage | 12.16.07 - 8:30 am | #

Thanks for the link.

Fama & French had a paper a few years ago discussing how markets cannot not be efficient as long as morons, er, "misinformed investors" exist.

(More specifically, I think their argument was that the morons will keep the Market Portfolio off of the efficient frontier, since the Truly Enlightened among us will not be able to perform a full "Moron Arbitrage.")

It seems to make quite a bit of sense (to me, anyway) that markets are never fully efficient, and there are some systematic oddities present.

- Jeff
Jeff V | 12.16.07 - 12:46 am | #