Asset prices can convey information, but they can also convey misinformation. These prices can be correct. Even a stopped clock gives the right time a couple times a day. The problem is the inability to identify when the price is correct and when it is not.
Because the price is supposed to reflect information, when it moves it can give the impression that this move reflects information that others have. Acting on this pseudo-information can intensify the price movement, convincing others to jump on the bandwagon, leading to a bubble or a crash. On Wed, Dec 17, 2008 at 11:22:19AM -0500, Doug Henwood wrote: > > On Dec 17, 2008, at 4:30 AM, Julio Huato wrote: > >> That is, markets *never* get asset prices right! > > They can sometimes, whatever "right" means exactly. I thought the EMH > merely claimed that market prices promptly reflect all available > information. If you believe that the markets are at least partly driven by > mob psychology, then prices often efficiently reflect nonsense. But not > always. > > Doug > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
