I think Dan Bron sent this paper to the forum a few years ago. The author errs in fixating on the "past prices can predict future prices" part of refuting EMH but this is patently false: the Japanese stock market did not tank in the wake of the Fukushima disaster because of its price history. It was affected by external, non-price information.
On Thu, Jul 25, 2019 at 11:53 AM Raul Miller <[email protected]> wrote: > On Wed, Jul 24, 2019 at 6:01 PM Jose Mario Quintana > <[email protected]> wrote: > > At least since 1980 the academia recognized the obvious: if the markets > are > > efficient there is no incentive for traders to be active; thus, relevant > > information is not assimilated by the markets and should become > inefficient > > (conversely, if the markets are inefficient there is incentive for > traders > > to be active; thus, relevant information is assimilated by the markets > and > > should become efficient). > > > > This is known as the Grossman-Stiglitz paradox. > > How fortunate it is, then, that markets are not efficient? > > The expression of this which I am fond of is > https://arxiv.org/pdf/1002.2284.pdf -- roughly paraphrased: markets > can be efficient on small problems, but there's exponential growth in > complexity over time, which quickly defeats any such advantages. > > Thanks, > > -- > Raul > ---------------------------------------------------------------------- > For information about J forums see http://www.jsoftware.com/forums.htm > -- Devon McCormick, CFA Quantitative Consultant ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
