How do investors think about financial markets? If you study finance at university, your teachers will tell you that markets are efficient (or at least largely efficient) and that any new piece of information is instantly incorporated into the share price of a company. Hence, looking at past news about a company should not influence your investment decision. But if you ask retail investors or financial professionals, that is what happens.
I love your scepticism. It completely supports my views when taking economics as part of my Land Management degree many years ago. Keep up the good work, happy new year!
There is an interesting paper (Gode & Sunder 1993) in which it is argued that a market made up of non-intelligent players would also be efficient. That is, efficient in the sense that it would, over the long run, come to the same equilibrium as an intelligent one. This means inductive proof of the efficient market hypothesis is not possible, as a conventional market would be indifferent towards the rationality of buyers and sellers in its long-term behavior.
I love your scepticism. It completely supports my views when taking economics as part of my Land Management degree many years ago. Keep up the good work, happy new year!
Great to see Peter Andre getting into academia post his pop career
I was waiting for someone to make that joke. I was thinking exactly the same when I wrote it. 😂
Academics live in a "should" world, not an "is" world. Should is a wasted word.
There is an interesting paper (Gode & Sunder 1993) in which it is argued that a market made up of non-intelligent players would also be efficient. That is, efficient in the sense that it would, over the long run, come to the same equilibrium as an intelligent one. This means inductive proof of the efficient market hypothesis is not possible, as a conventional market would be indifferent towards the rationality of buyers and sellers in its long-term behavior.