The EMH account of mean-reversion in asset values is "unforecastable, unmotivated, unexplained time-varying required rates of return". The EMH account of large swing in asset values is "rapid, unforecastable, unmotivated, unexplained shifts in time-varying required rates of return". It's not a theory: it's an academic grift: Comment of the Day; Charles Steindel: Binyamin Appelbaum: "As the old saying goes, there are no efficient market hypothesists in foxholes. They gave a guy a Nobel Prize for writing that financial markets are efficient. I'll never find that not funny: "That's the point. (Fluctuations in) returns for all practical purposes (any set investment horizon, particularly shorter ones) aren't predictable. But levels of prices can be way out of whack. The resolution is that we just don't know when sanity will be restored. Another way to say it is that over a sufficiently long horizon the average level of prices is about equal to the value assumed by efficient markets. Just means prices fluctuate (a lot!) around that efficient value...
commentoftheday #economicsgonewrong
