I for one will not agree, and I'd certainly hope your's is a minority view. We may disagree, believe him incorrect in his view, feel he is misinformed, and generally have a strong desire to prove him wrong , but I don't think most of us feel the gentleman to be unintelligent.
I use these techniques and I am an intraday equities trader. I find them extremely useful. I believe in something close to the weak form of EMH. For example, when valuing options, we believe they follow a lognormal brownian motion. It has no affect on profitability, if you get paid to trade when the edge is big enough. nitro
It's not that there isn't any scientific evidence disproving EMH, it's just that anyone attempting to even question the so-called evidence is ignored or ostracized by established academics. I recall an interview to Eugene Fama posted years ago here on ET saying something like: anyone disagreeing with him would be expelled from academia. What's the EMH literature all about? What evidence are we talking about? That the average market participant or mutual fund underperforms the market, that simple MA crossover systems don't make money, that most daytraders fail.... Everybody here knows all that. But that's not evidence that actively trading the markets is futile. The reality is that trading is a performance profession with heavy 'talent' and dedication prerequisites. Most people are just not wired to become traders or can't or don't want to do all the work involved. So a few will be successful, and most will fail. EMH academics think that just because THEY can't figure out how to (legally) make money in the markets, then NO ONE can do it. That's not just illogical but incredibly overbearing and presumptuous. The social dynamics of academics is characterized by heavy group thinking, crowd and consensus behavior. By contrast, a trader's job is to question the sustainability of existing price trends, in other words, the current consensus. So if you're a trader unfortunately you will inmediately question any kind of consensus, and you probably wouldn't survive a day as an academic as you would ruffle too many feathers. And viceversa if you're an academic, chances are as a trader you'll always buy highs and sell lows.
Maybe the reason is that "buy and hold" is too risky? That you could lose 50% or more in bear markets like 2000-2002... that there are no guarantees that markets will always recover their losses (within your lifetime) as in Japan... should I go on?
This applies to all areas of academia. They don't come out and debate things openly, they control the debate venues, they control the evidence, they always are right... until they come up with a new theory. Once you realize that, you are free to investigate anything you want at will and it really can pay off..
Sure, market mechanics can be learned, but they must also be experienced. Those looking for perfect markets, will not find them and those concerned about "chaotic" markets need to learn how to respond to them. (off soapbox now, LOL). All the best, Don __________________ Don Bright (not an alias) http://www.stocktrading.com Excellent, simply excellent
I would be more interested in proof that they don't. I doubt that survivorship would be anywhere sufficient to explain this. That stocks go up, in almost every country, on every index, for a century or so, only because of survivorship bias I think is a huge stretch. Among other things, those who hold stock indexes bear the full weight of the spectrum, from those that do the best, to those that do the worst (and may be delisted). If a stock has been so punished in its price that it is ready to delist, then those holding the indexes have already borne the drop in price. Or sudden bankruptcy. For example, Vanguard 500 mutual fund. This and other index funds do a generally good job of tracking an index, once fees are extracted. Further is the question of just how many companies are delisted each year from an index. I do not think that is particularly high. The only thing that remains, is to calculate how much FURTHER loss on average occurs after delisting to subtract this from the general market performance.
This is just me speculating but im pretty sure the market is efficient to the point where a person with a given set of talent, education and money could not make much more money doing something else with his time. lol what to choose, being a rock star would be fun..
Do they have access to consistent performers though? I mean is Goldman really going to let some academic analyse trade-by-trade the long-term performance of their prop desk? Presumably an investment bank is not going to make giant bets with its own capital, year after year, if they are underperforming the S&P. Also what about floor traders, have we seen any studies showing that the performance of market makers or locals is just as mediocre as mutual fund managers? What about arb shops? DE Shaw, Citadel etc? There is also the ultimate market evidence against market efficiancy - some shares of listed traders/investors' vehicles trade at a premium. In other words, the market is prepared to pay >100% of assets, just to have access to that manager's performance. Thus the market itself is saying that this trader/investor is going to outperform. This gives rise to a paradox which means the market cannot possibly efficient. If it is efficient, then the premium for the manager means the market itself thinks that the market can be beaten. An efficient market by definition cannot have any premium to net asset value for an investment fund manager. Hence if one sees such a premium, the EMH is violated.