[js8]

Frankly, everybody with a bit of economic common sense knows that efficient market hypothesis (EMH) is just a weird theoretical nonsense which is nowhere close to describing real world.

If you want a full critique, read Steve Keen's Debunking Economics, it has a chapter on EMH.

Oh and by the way, there is quite a bit of people who believe that P=NP. Most famously Donald Knuth. I recently became convinced about that as well.

Amusingly enough, the first thing that a rational person would do upon discovering a relatively efficient algorithm to solve NP problems would be to cash in all the Bitcoins. Thus proving in practice that no, markets are not really efficient. :-)

[TekMol]

    Frankly, everybody with a bit of economic common sense knows

Said every hot headed teenager with an attention span too short to think through scientific arguments.

[Thiez]

If you want to do the 'scientific arguments' thing, then surely it is up to the EMH proponents to convince the rest of us, while the rest of us stick to the null hypothesis.

[psergeant]

> Frankly, everybody with a bit of economic common sense knows

Citation? True Scotsman fallacy?

[js8]

I gave a citation. When I say "everybody with a bit of economic common sense", I mean everybody in economic profession who is able of some elementary reflection on what they are doing. Even most neoclassicals (which is probably the only school where somebody actually believes in EMH) know that many of the theoretical assumptions are bullshit. Another classic example, aside from EMH, is SMD theorem.

I am pretty sure that most economic Nobel prize winners do not believe in EMH, from the top of my head, Akerlof and Kahneman.

[psergeant]

You gave a link to a popsci book whose Wikipedia Criticism section is ... unforgiving and relentless.

You then double down on your True Scotsman fallacy, mae a sweeping unsupported claim about a nebulous group of people, and follow it up with another conjecture about another group in an attempt to appeal to authority.

We can do better than this.

[js8]

So do better! Find me an economist who truly believes in EMH and is either not a neoclassical (that's about half of all economists) or makes some real-world economic decisions (like in a central bank) or has expressed his belief in support of EMH after 2008 crash.

I gave you two Nobel prize recipients who actually wrote famous articles explicitly outlining market inefficiencies.

Regarding Steve Keen, I don't have my copy handy, but I am sure it has plenty of additional citations. While it is written in accessible style, it is certainly not unsupported. (I personally think that every student of economics should read him, but it's up to each individual what they want to do with their free time.) Many post-keynesians I have read expressed similar dismay about EMH.

[psergeant]

The product description for the book you quoted:

> Debunking Economics exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong.

Plainly alludes to the fact that the book is not mainstream economic theory. People arguing for minority views of complex subjects find — rightly — that the burden of proof is on them, and not the other way around.

Related: it’s not in the least bit surprising to see the book make an appeal to common sense over “those experts”. Truly we live in the age of Trump and Farage.

[js8]

And Sharpe and Fama, which he quotes expressing doubts about empirical validity of EMH, are mainstream?

But you can only lead horse to a water..

[js8]

So I actually opened Keen's book - and it's more damning than I remembered. He quotes evidence that two major proponents of EMH - Sharpe and Fama - have made very critical comments as to its (EMH) empirical validity.

Isn't it also ironic that you criticize the book as being pop-sci by perusing Wikipedia? You know, in both cases, being pop-sci doesn't imply being wrong.

[jdironman]

Maybe someone knows something we don't and that's why crypto coin was created in the first place? Just having fun speculating guys.

[heavenlyblue]

EMH is supported by the existence of Index Funds. So the truth of EMH depends on any point in time where the answer to the question of "Do Index Funds on average earn more than Private Funds?" is yes.

It's not even binary and is not a static property, just like our laws are just a proxy to a question of what is ethical or moral; and the truth of their purpose is entirely based on the historical context.

[bluGill]

Not really. Index funds depend on the markets being efficient enough that the cost of finding the inefficiencies is higher than the gain from finding them. The more people who blindly invest in markets, the less efficient the market is in reality, and the more possible gain for those who do research.

Note that I said "people invest in markets", and not index funds above. There is a subtle differences, modern index funds are not true market indexes. There are fund managers who trade actively - however they trade mush less often than a traditional actively managed funds and with different rules. The managers do watch earnings reports and sell bad stocks, but the managers are also in for the long term and re willing to wait out a downturn. The managers also know they are judged by the index, and so bad stocks are not a negative in the same way that active funds are judged. Thus an index fund trades much less often, but they are not really a buy the index as published.

[heavenlyblue]

What I am saying is that the definition of an inefficiency in the market is the information that only a closed subset of the market has access to.

Let's take an example: China. While they keep the image of a purely capitalist environment, every company above a certain size is expected to have some sort of government control. That would be the inefficiency of that market, because at that point people stop making decisions based on what the company wants but rather what government wants. You can't have open access to the strategic planning by the government.

Besides, you're clearly trying to argue definitions rather than trying to take a step back and realising that I am arguing abstracts rather than specifics in the first place. In other words - what you're saying isn't denying what I said; it's just embodying the concepts in the real world.

For example: _any_ true real-life index fund would always need to trade at a certain point, and that has to be done by someone. So yes - an index fund is just a "glorified" version of a private fund; because people are still managing it at a certain point. But the reason it still makes money is because markets are efficient.

[js8]

I am not sure I understand. If EMH was true, they should perform the same, no?

I would argue that belief in EMH is supported by existence of index funds. But index funds are also supported by laws that require certain level of openness and information sharing (such as laws against insider trading). When this information sharing is not enforced by law, it is a major source of market inefficiencies.