Do you believe in the efficient market hypothesis?

Do you believe in the efficient market hypothesis?

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That's a dude.

>human error doesn't exist

yes
themoneyillusion.com/?p=3773

Yes. this is why I think TA is a more powerful tool for the everyday person. You by yourself, are unlikely to do a better job than the huge funds who have discovered all potential value before you and who make much more (((accurate predictions))) than you ever could.

This is why it's better to follow their movements, and of the crowd as whole, by measuring market movements through chart analysis.

If you do make gains off of your fundamental analysis, it's not because you saw something that no one else saw, it's because new value was created, after you had invested, and the market then priced that in. In a sense, you're speculating about the potential a company has, when you do your own investing based on fundamental analysis.

Ratios and forecasts will only tell so much about a company. You need to know the market operate in; how they target customers through pricing and/or quality; how do they minimise costs and be more efficient (ratios will only tell IF they are doing this, not always HOW); and you have to speculate about what the future holds for their stability and market place, going into the future. That, to me, is how you invest. Not just looking at ratios and making forecasts.

bump (it'd be nice to see more discussion)

I don't, because it assumes that bubbles cannot exist, which is hilarious when you consider the dotcom bubble or the housing market bubble. If markets were actually efficient, people wouldn't have made hundreds of millions of dollars by shorting these bubbles.

EMH has been discredited over the last 20 years imo.

>insider trading does not exist

That's not what the efficient market hypothesis says, though. All it states is that current prices already reflect all publicly available information. People who shorted those bubbles did so based on available information.

>All it states is that current prices already reflect all publicly available information
which is ridiculous to me, because it assumes prices instantly change based on news, which is false because anyone who has traded stocks near close and has seen how slowly the market reacts to news near close knows that's not true.

clitco.in

No, as it is rational in contrast to the actual market movement.

Anybody buying or selling X for trivial reasons (not based on information) would mean this hypothesis is wrong.

The early Bitcoin adopters are a good example of this case. There was no actual market for it at the time, yet techies decided to buy BTC.

The demand rises, followed by a higher price, with the same available information.

Also, if current prices reflected all publicly available information at the time, why were those stocks so overvalued? Again, the EMH doesn't account for bubbles and irrational exuberance.

I don't think it's true yet, but it is becoming more true everyday as hedge funds quantify information into dollar values.

How can such an hypothesis switch from falsy to truthy?
Sounds like BS.

"Yeah quantum physics will start to work in 10 years"

>which is ridiculous to me, because it assumes prices instantly change based on news,

That's not what it says either. Prices are reflections of certainty or uncertainty based on the news. Optimism or pessimism based on currently available information are already priced in. That's what the hypothesis states.

>which is false because anyone who has traded stocks near close and has seen how slowly the market reacts to news near close knows that's not true.

Because the news has already been priced in. Currently available information includes speculation on the future base on that info.

>Also, if current prices reflected all publicly available information at the time, why were those stocks so overvalued? Again, the EMH doesn't account for bubbles and irrational exuberance.

Information isn't always true, and peoples' assessments on the future based on that information isn't always right. But whatever they believe, the price of the asset/security accurately reflects it. That's just what the hypothesis posits, not that stocks, bonds, etc. will always be fairly priced.

Not in the long run unless we were all willing to let AI take over the economy; Maybe block chain will play a part in that process. ANS and Ethereum already seem to be pursuing this idea. Even then it won't be a perfectly effective market and I don't think we would want it to be that way.

>How can such an hypothesis switch from falsy to truthy?

I meant markets are becoming more efficient daily. The efficiency is gradually approaching the hypothesis, but may never get there.

smart money doesn't use TA and they haven't for decades. Smart money uses quantative analysis

> Optimism or pessimism based on currently available information are already priced in.
So I'm to believe there are an equal amount of optimists and pessimists in a market at the same time that keep a price at its "correct price"? That's absurd, there are markets where there are FAR more optimists than pessimists.

if the efficient market hypothesis was correct then Warren Buffett wouldn't be the most successful investor who ever lived

I believe it's the best we've come up with so far, barring perhaps a gift-based economy

If you consider yourself part of smart money, then you're likely working for a larger organization who can provide you with the funds to drastically change the price of a stock, therefore, pricing in what was initially unpriced value (that you noticed with your smartness) by the market. Other funds may notice this price movement, look into the details themselves, and also add in their money, further pricing in the potential value (or perhaps they noticed it at the same time as you, and invested at the same instance your fund did).

There are people who do this for a job, their lives revolve around it, they are "The Market". I find it difficult to see how they wouldn't pick up on a lot of things (therefore being inefficient). Of course they don't need TA - they are the volume spikes - the change in trends - the change in slope of a moving average.

I think venture capitalists are slightly different, in that it's more of a gamble, than what "smart money" would do.

It's demonstrably false, so no.

I see most of you are talking about equities. I don't know much about that. But I've been studying forex and commodities for awhile now and from what I've learned I think that a significant amount of the funds do use technical indicators and that's unlikely to change because they consider that strategy as diversified from other types of strategies.

In addition to this, I understand a lot of people will be thinking of arbitrage, but my view is that this isn't a huge deal for equities (I could be wrong, please discuss more if I am). I view arbitrage as more of a forex/ derivative issue.

usually when there is such a wide difference in methodologies the middle path is usually correct.

pretty stupid to ignore TA, though FA clearly gives the bigger moves.

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>pretty stupid to ignore TA
There is no substantial evidence that TA works at all.

The TA that does end up working gets added to QA toolbox and is no longer considered TA (see: mean reversion)

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Why has technical analysis become some fucking dirty word? It's literally studying charts and volume (there are derivations of studies which stem from that). Moving averages is part of TA. There's some retarded superiority that's developing that I really don't like.

>Why has technical analysis become some fucking dirty word?
because of TA practitioners themselves and their non-falsifiable indicators

Again, there are some TA indicators that actually do work, but once a quant proves that they do work in R/Python and rigorously backtests them, they are no longer TA but QA

TA is bullshit without verification.

oh for fucks sake, it is...

I understand where you're coming from, but I simply can't agree that it should be treated as some pseudoscience.

Price movements are determined by the differing levels of Bid and Offer volume. Drawing conclusions from measurements of price movements that occurs from this, or from measurements of volume itself (or a combination of both), makes complete sense to me.

What no way, proof?

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google search:
noun FINANCE
financial analysis that uses patterns in market data to identify trends and make predictions.
"he reads up on company fundamentals and news as a way to double-check his technical analysis"

ignore what you don't like if you want, but don't be ignorant of what something is because of some opinion you hold

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How do you know your TA even works and has a good sharp ratio without backtesting? Does your TA indicator even beat a buy-and-hold strategy?

Arbitrage opportunities are the greatest in derivatives, yes.

When it works, its due to the brilliant TA.
Whent it doesn't work, the market is at fault because it behaved wrong.

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manshoulders

op knows that obviously

Only when there exists infinitesimal information asymmetry.

that is exacyly how speculators rationalize as investments their unconsciously riskful speculations

EMH: TA is useless
>user on anonymous goat hoarding board
>"I believe in the EMH because TA works"

That's something I actually learnt in this from one the articles posted. Apparently it has something with accepting more risk.

*something to do