A Possible Improvement on the Efficient Market Hypothesis
This year Eugene Fama won the nobel prize in Economics for his work on the Efficient Market Hypothesis (EMH). The idea behind his work is that it is impossible to “beat” the market, because all information about a given stock is available to everyone. That is, the EMH assumes that a stock valued at $60 is in fact worth $60: it is impossible to purchase an undervalued stock. The only way one could potentially make higher returns than the average, then, is to engage in riskier trading where bigger payoffs are possible. Investopedia offers a neat little video overview of Continue reading A Possible Improvement on the Efficient Market Hypothesis