Skidelsky wrote: > Greenspan must have believed something like > the "efficient-market hypothesis," which holds > that financial markets always price assets > correctly.
But this is *not* what the EMH holds. I know that in these times of philo-Keynesian euphoria, these factual inaccuracies may not matter much, but it does make one doubtful of Skidelsky's intellectual diligence. Most times, superficial knowledge is better than complete ignorance. But it's still superficial. It's not hard to see that the EMH doesn't hold what Skidelsky says it holds. Say X, the market price of an asset at a point in time, is a random variable (discrete or continuous, but nontrivially random, i.e. var(X)>0). Then: Pr[X=E(X)]<1 And, in the particular case when X is continuous, the implication of the EMH is the exact opposite of what Skidelsky claims: Pr[X=E(X)]=0 That is, markets *never* get asset prices right! QED _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
