What Is the Efficient Market Hypothesis?
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- Опубликовано: 11 сен 2024
- The main idea behind the efficient market hypothesis is that the prices of traded assets already reflect all publicly available information - making it impossible to “beat the market” by systematically outperforming it over time.
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You don't beat the market, you leverage it. Pick incipient companies based on their intrinsic value and future growth potential. Over time they will grow and get discovered by others too. Stock markets react but they don't predict, much like our own lives. If you invest in learning to "code" chances are that you will land up a high paying Tech job. That's the play. Once you land that job your next jump won't get you a significant increase in pay, because you have been already, discovered, by the market.
Total BS. The "intrinsic value" and "future growth potential" are just OPINIONS. There is no known scientific method to determine intrinsic value of a stock. In fact that "intrinsic value" exists is itself an OPINION .
except that AI will take over all jobs, including "high paying Tech job" in this decade
if the EMH were entirely valid, bubbles would never exist and value investors would not tend to beat the market averages over time.
Peter Lynch of Fidelity, who on average beat the market averages for almost 20 years, also noted that the EFH contradicted the random-walk hypothesis: If markets are efficient, then asset prices are NOT random. but if asset prices move randomly it follows that asset prices are not efficient.
Peter Lynch is wrong though
@@beamed5382 I don't see anything wrong with that analysis of his, it's logically valid. Could you explain how it's wrong?
@@jeevacation just because you beat the market by very small margins doesn't prove EMH wrong? There's nothing in that to support the theory of constant bubbles? In fact, the only time when we could prove that there in fact were a bubble, was the financial crisis. And, that time EMH was eactually the proven cause due to information being hidden from the market, therefore proving EMH further in an emprical state of finance.
@@beamed5382 Peter Lynch beat the market by small margins?!?!
Bubbles don't prove market are inefficient. In fact the fact that nobody has successfully ever predicted beginning and end of bubbles proves that markets are efficient.
Also Peter Lynch was plain Lucky. You can get 20 Heads in a row just because of plain luck.
Markets are often perceived as efficient, yet this efficiency is skewed in favor of those with unfair competitive advantages. Participants typically respond to imperfect information, or the "unknown," while a select few manipulate the narrative and control key variables of cause and effect. Such manipulation would create an artificially efficient environment, characterized by illusory stability. These underlying inefficiencies would only become apparent when market participants discern the manipulative practices, exposing the inherent flaws.
Amazing video thanks a lot!.
The Background Music is very loud or your speaker's volume is low. Please adjust any one of this
We would have an efficient market, if we were all efficient robots but until that time we all make mistakes.. including investors
Markets can be efficient even when participants are not.
So when tilray was at 300 dollars a share or beyond meat at 230, or roku currently at 170 that's all efficent?
So basically, you can't beat the market - so join it, i.e buy Exchange Traded Funds (ETFs) ?
C. Lincoln You have to bet against the consensus „and be right“ (!) to beat the market.
You should buy ETFs that are very diversified and have a low beta, like VTI and BRK.B. The reason you want a diversified pool of stocks is that each stock added to your portfolio drives down co variance and lowers the overall beta. Reducing your beta and lowering the standard deviation in your stocks in what you should be aiming to do, rather than purchase risky assets.
The average is only "50%" in normal distributions, where it happens to also be the median. The EMH says you can't beat the market not because you are unskilled but that the market incorporates such "market beating" information into its price system because you give it away when you act upon it.
You don't beat the market, you leverage it. Pick incipient companies based on their intrinsic value and future growth potential. Over time they will grow and get discovered by others too. Stock markets react but they don't predict, much like out own lives. If you invest in learning to "code" chances are that you will land up a high paying Tech job. That's the play. Once you land that job you next jump won't get you a significant jump because you have been discovered already by the market.
For most people, diversification is a good idea. The more you diversify the similar your returns will be to the market. However, if you know what you're doing, making huge bets on 1 or 2 companies you really understand can pay off tremendously.
You need to do something about the volume levels on this video. The speaker level is inconsistent.
The last remark in your video you are saying: "Nowadays new information starts to change markets in seconds, making the efficient market hypothesis that much more efficient."
Do you then argue that technological changes in recent time, (e.g. algorithmic trading, AI, easier access to new information) has actually made the markets more efficient?
It just means there are far more players in the market with better tools. Everyone is incorporating everyone else's strategy. Profits still are made but they are on the cutting edge, or projects with significant risk.
Andy my Corporate Finance Professor once said information is powerful it is however asymmetrical.
Yea what happens when the public is working with the same information but are not robots, And sellers have the same information but they have algorithms? Algorithms can react in The milliseconds, the retail trader can’t. So it’s tools that help you beat the market and the EMH is efficient only for the hedge funds. EMH is not efficient for the retail traders.
Doesn't Hayek's knowledge problem contradict efficient market hypothesis?
What is the example of public information? I don't understand that 😭😭😭
MoMa L3 CF on est là!
Sorry guys but it just not working. Whenever tryed to trade the news i always lost. Investors just does'nt care much with the media. Wich way you can folow 1000's of news during job time? Those guys simply does'nt have a time.
what does 'over-performing' the market mean?
Beating the index
Beating the index
Memerlukan lebih ramai orang jadi sebarkan video ini lebih banyak
Explain the difference between an efficient market and an arbitrage-free market.
there is no difference if you consider arbitrage over time to be arbitrage
Then how about the 2008 financial crisis? Or the Web bubble of 2001? How does the efficient market hypothesis fit into that? If it were true that the market already knows about everything already made public and stock prices reflect that information, 2001 and 2008 shouldn't have happened at all. This efficient market hypothesis is only relevant for acute events such as an oil crisis or war or an event that happens suddenly. This is less true for systematic and chronic problems rooted in the prices, or else 2008 shouldn't have happened as the market should have seen that MBS's were clearly manipulated and lending practices were terrible. There were investors that saw it and shorted the market because they saw it. Yet the "efficient" market didn't see it.
In science, if you have an experiment produce results that the underlying theory can't explain, it is useless. Economics has a problem where they do the opposite and make their models more convoluted and "nuanced". It has been shown many times that the market is not perfectly efficient when it comes to all public information.
The EMH does not do any forecast, it just says that markets aggregate and spread informations. If everybody thinks something wrong, that will be reflected by prices. Prices are at most random walks, EMH says you can't predict on historical data because the current price contains those informations yet (as shown by covariance in data and so quite scientifically evident - weak form) nothing more. Personally, I don't agree with semi-strong assumptions.
wisdom of the crowd?