The efficient market hypothesis claimed that, over time, investors couldn't beat the market...that it was smarter than investors. And yes, Warren Buffett chuckles at this notion, because he slaughtered it for half a century. He is wealthy, and Andrew Lo, the MIT professor who posited this theory in 2004, is not. But just to humor the position, the adaptive market hypothesis is cattle rope, trying to bring the efficient market theory together with various models of irrational behavior in the stock market. It's kind of a Darwinian approach to the way in which the stock market works, relying largely on psychology striating the food chain for who does what to whom, in a kind of unholy wrestling match between greed and fear, where fraudulent behavior is the referee.
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Finance: What is Efficient Markets Theor...141 Views
Finance a la shmoop what is the efficient markets theory well
there should just be a big picture of Warren Buffett right here it should be [Two men carrying a framed picture of Warren Buffett]
the man Warren explaining the efficient market theory himself and that theory
states that it's impossible to beat the market over a sustained period of time
it should be Warren Buffett who explains that all relevant information comes [Warren Buffett giving a presentation on stage]
public in public stocks and that the market more or less immediately
incorporates all that information in its pricing
hence nobody can ever beat the market over a long period of time so why should [Men falling asleep during a presentation]
Warren Buffett be giving this little definition because the efficient market
theory is wrong Buffett has beaten the market for decades in a row in every way [Warren Buffett beating up the market with a stick]
shape and form so you have a really memorable huge figure in finance this
guy and then pipsqueak professors who are kind of a laughing stock whenever the [Professor jumping on the microphone stand trying to talk]
wealthy power crowds gather in Omaha for their National Convention that's what
they say at the Woodstock of Finance if you will fortunately most people keep [Man with arms folded standing naked in a corridor]
their clothes on for this one
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