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What do physicists think of the Efficient Market hypothesis?
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[QUOTE="BWV, post: 6420226, member: 88243"] Why is it the Efficient Market Hypothesis rather than the Efficient Market Theory? Economists are not shy from using the word theory in the same sense as in physical sciences- a testable model that describes a range of phenomena. Eugene Fama, the creator of EMH, explains in his Nobel Prize lecture: So you cannot test the EMH because you never know whether the market or your model is wrong. Renaissance and Jim Simons is an interesting case - a clear example of a group that has achieved real excess returns. However, they appear to be alone - Three Sigma, their closest competitor, has returned no where near their performance. Also, the fact that Renaissance exists means that it becomes even more unlikely that you or your financial advisor will be able to consistently beat the market as they have mined most of the exploitable trading strategies that are out there, and the prices you then have to pick from reflect the impact of all of their trading. Beating the market is a zero-sum game, so the average investor gets the market return less fees and trading costs [/QUOTE]
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What do physicists think of the Efficient Market hypothesis?
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