> It was Fama who idea posited that it is virtually impossible to consistently beat the market
The idea that one cannot beat the market can be traced back, at least (and probably even earlier), to Louis Bachelier who in his Théorie de la Spéculation dissertation (1900) wrote "the mathematical expectation of the speculator is zero" (in French, of course). > Weak: the prices of securities reflect all available public market information > > Semi-strong: Additionally prices rapidly adjust to new information > > Strong: not even insider knowledge can give investors a predictive edge What I remember is somewhat different (based on the information being used to try to beat the market): Weak-form - technical analysis (based just on the historical prices of the security). Semi-strong-form - fundamental analysis (based on any publicly available information). Strong-form - analysis based on any available information (public or private). > I tried to offer some concrete examples that it EMH does not hold. Earlier in this thread, I offered the entire trading record of a former first lady in her younger years consisting in achieving a return of 9900% return in 10 months. Another one is Goldman Sachs producing a profit every single day of the 63 trading days of Q1 of 2010. On the one hand, it is not easy to produce consistent attractive risk-adjusted excess returns by taking advantage of alleged mispricing of any liquid security (e.g., an ETF tracking the S&P500). On the other hand, it is easy to assert that it is mispriced (without specifying whether the security is overpriced or underpriced) and offer an analysis after the fact (market commentators, implicitly or explicitly, do that every business day) which, from my point of view, might be as useful as Monday morning quarterbacking; then again, this is the chat forum. ;) On Tue, Aug 13, 2019 at 4:23 PM Donna Y <dy...@sympatico.ca> wrote: > I only paraphrased standard definitions for the terms I used—you asked > what I meant. > > information includes data on previous prices, trading volume > > > It was Fama who idea posited that it is virtually impossible to > consistently beat the market– to make investment returns that outperform > the overall market average as reflected by major stock indexes such as the > S&P 500 Index. > > This depends on assuming that stocks always trade at their fair market > value. > > Past price performance can’t predict future prices. > > There are three variations of the EMH hypothesis – the weak, semi-strong, > and strong form– which represent three different assumed levels of market > efficiency. > > Weak: the prices of securities reflect all available public market > information > > Semi-strong: Additionally prices rapidly adjust to new information > > Strong: not even insider knowledge can give investors a predictive edge > > Exploitable opportunities should not exist in an efficient market. in > efficient markets, investors can- not earn a risk-weighted excess return. > > In efficient markets, available information is already incorporated in > stock prices. > > > > I tried to offer some concrete examples that it EMH does not hold. > > The equivalency of P and NP is one of the seven problems that the Clay > Mathematics Institute will give you a million dollars for proving — or > disproving. > > Maybe it would be more profitable to focus on that. > > > > Donna Y > dy...@sympatico.ca > > > > On Aug 13, 2019, at 2:24 PM, Raul Miller <rauldmil...@gmail.com> wrote: > > > > On Mon, Aug 12, 2019 at 7:39 PM Donna Y <dy...@sympatico.ca> wrote: > >> Outperform the market or beat the market--the security will produces > higher returns, for a given timeframe than the major market indexes. > > > > Higher than what? Higher than the average? That happens all the time. > > Higher than the maximum? That's silly, especially if your performance > > is the current maximum. > > > >> The Efficient Market Hypothesis, or EMH, is an investment theory > >> that share prices reflect all information thus theoretically, > >> neither technical nor fundamental analysis can produce risk-adjusted > >> excess returns thus impossible to outperform the overall market > >> through expert stock selection or market timing. > > > > What's "all information"? > > > > If it's "all available information" then the claim is meaningless, > > since any information that's being ignored can be said to be "not > > available". > > > > If it's really "all information" then it's "meaningful but silly", > > because neither people, nor markets are omniscient. It is something a > > sleazy salesman might claim though, when he really doesn't have any > > clue what he's talking about. > > > > Thanks, > > > > -- > > Raul > > ---------------------------------------------------------------------- > > For information about J forums see http://www.jsoftware.com/forums.htm > > ---------------------------------------------------------------------- > For information about J forums see http://www.jsoftware.com/forums.htm > ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
