Daniel Davies wrote:
The more hazy idea behind efficient markets theory is that stock market prices are in some way the "best" forecast of discounted value of future cash flows.
Yup. It's been ages since I read this stuff, but some of the more honest economists conceded there was a "joint hypothesis problem" with EM theory - the speed with which prices reflected the thinking of market participants, and the quality of that thinking itself, two separate issues that often get conflated into a "best available wisdom" argument. Greenspan loved to cite the wisdom of the markets as a way of avoiding the word "bubble" in the late 1990s.
Doug
