Why the efficient market hypothesis is wrong

Posted August 15, 2008

“If there were no inefficiencies to take advantage of, how could I trade the market for quick profits? But truthfully, the markets aren’t nearly as efficient as you might think.” — Charles Delvalle

by Charles Delvalle

Baltimore — (TFN): Have you ever heard of the efficient market hypothesis?

The basis of the hypothesis is that stocks trade based on all known information. In other words, there is never news that the market hasn’t already priced in.

The implication is that the market is never inefficient.

If you’re looking at that and thinking about how much of a bummer it is, I don’t blame you. I found out about the theory when I first started learning about the markets back when I was 16 (yeah, I was young).

I thought that it meant that there was no sure-fire way to beat the market. After all, if there were no inefficiencies to take advantage of, how could I trade the market for quick profits?

But truthfully, the markets aren’t nearly as efficient as you might think. Read on to learn more.

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