EMH

[Doug Henwood]

Date: Fri, 18 Feb 2000 10:04:05 -0500
From: Enrique Diaz-Alvarez <enrique at anise.ee.cornell.edu>
Organization: Cornell University
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To: lbo-talk at lists.panix.com
Subject: EMH a hypothesis?
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DANIEL.DAVIES at flemings.com wrote:


>
>
>  Efficient market theory isn't really a "theory" in this sense -- it's an
>  empirical claim about stock markets.  There are numerous different and
>  incompatible theories of the underlying "microstructure", most of which are
>  at least consistent with "the efficient markets hypothesis".
>
>  dd
>
>

Dumb question: EMH says that "prices in an efficient market will reflect all
available information". But for this to be a testable hypothesis, instead of a
tautology, there needs to be a way to determine the "price which reflects all
available information" that is independent of market prices, right? Then we
could go ahead and *test* the theory, by looking at the prices in a largely
efficient market, such as the US, and checking them with our
indepedently-determined "pricves reflecting all availabel information".

Absent such a method for determining prices, isn't EMH about as meaningful as
saying that in a parallel universe, I am married to Tyra Banks?

--
Enrique Diaz-Alvarez            Office # (607) 255 5034
Electrical Engineering          Home #   (607) 272 4808
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