Efficient market hypothesis |
| Written by Mikhail Kopytine | |||||
| Tuesday, 15 April 2008 08:16 | |||||
"You can't beat the market". Textbooks present three forms of this statement. To quote McCauley (who gives credit for these to "finance theorists"): "Weak form: it's impossible to develop trading rules to beat market averages based on empirical price statistics. Semi-strong form: it's impossible to obtain abnormal returns based on the use of any publicly available information. Strong form: it's impossible to beat the market consistently by using any information, including insider information." The strong form makes a person with a natural science eduction wonder whether this is a "law of nature" or a "law" enforced by "law enforcement". The weak form seems to be formulated in a falsifiable way. It is this form that can be falsified in spectacular ways by using world's most liquid market -- the forex market. Bookmark with:
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| Last Updated ( Friday, 11 September 2009 16:00 ) | |||||
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