Efficient Market Hypothesis
Statement and implication
What does the Efficient-market hypothesis state?
Asset prices reflect all available information.
What is the implication of the Efficient-market hypothesis?
You shouldn’t expect to beat the market without a unique edge, except by chance.
Buffett and the disappearing edge
How did Warren Buffett beat the market?
By running simple formulas over stock prices.
Why can you no longer use Warren Buffett’s method for beating the market?
The market became more efficient as everyone became aware of the edge.
References
- Kindly Stop Saying the Efficient Market Hypothesis is Dead, The Deep Dish