An older paper has come across my desk as a good review of the history of the efficient markets hypothesis (EMH) as well as a novel view about how the EMH fit within a world with pricing bubbles, see Stephen Brown in the "The Efficient Markets Hypothesis: the Demise of the Demon of Choice".
Brown provides a good explanation of the foundations in the EMH along with the fact that most practitioners do not believe in the efficient markets hypothesis. Nevertheless, even though the EMH may. to be true, it may be important for many to believe that it is close to truth. Many will lose money attempting to prove the EMH to be false. Because there is this lack of belief in the EMH, many traders will take more risk and use more leverage than they should. Of course, when a crisis comes there will be greater loses and many traders are on the wrong side of the market.
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