Amy Anyone: What is EMH?
Boris The Banker: That’s the Efficient Market Hypothesis, or sometimes the Efficient Markets Hypothesis.
Amy: What’s that?
Boris: It says that all available and relevant information has been taken into account in the price of items in the market — a stock market for example.
Amy: Does it have any implications?
Boris: Yes. If the hypothesis is true, then it is impossible to usefully predict price changes.
Amy: Is the hypothesis true?
Boris: No. (silently to self: Otherwise my job is pointless.) Sometimes prices are too high and sometimes prices are too low.
Amy: Hmm. Is the market efficient for expensive bankers like you?
Boris: Yes. Obviously banks wouldn’t pay more than was reasonable for people like me.
Amy: Oh?
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