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efficient market hypothesis In finance, the efficient-market hypothesis (EMH) asserts that financial markets are “informationally efficient”, or that prices on traded assets (e.g., stocks, bonds, or property) already reflect all known information, and instantly change to reflect new information. Therefore, according to theory, it is impossible to consistently outperform the market by using any information that the market already knows, except through luck. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future. The hypothesis has been attacked lately by critics who blame belief in rational markets for much of the current financial crisis, with noted financial journalist Roger Lowenstein recently declaring “The upside of the current Great Recession is that it could drive a stake through the heart of the academic nostrum known as the efficient-market hypothesis.” (Wikipedia Jan 2010)
Information technology
By John Schroy, on July 10th, 2009 | 
Whereas, in the days of Benjamin Graham, an analyst could count on Standard Statistics to provide the essential facts, three-quarters of a century later, this is no longer true in the case of its successor, Standard & Poor’s.
The tsunami of free financial information and increasingly complex markets, have driven up the cost of traditional security analysis. The less expensive route, technical analysis, is now favored by many. We must move beyond Graham & Dodd if fact-based analysis is to remain relevant.
Post Modern Security Analysis
By John Schroy, on July 7th, 2009 | 
Post Modern Security Analysis calls for facts, not opinions. Collaborative research, not the crowdsourcing of opinion, is required.
A tsunami of raw, unanalyzed open source information now overwhelms the market, calling for new tools and new ways to motivate researchers.
To this end, Capital Market Wiki has tweaked the Wikipedia model, added a semantic structure and built-in incentives, and has created a system for collaborative investment research.
Financial economic theory
By John Schroy, on June 16th, 2009 | 
A recent poll of members of the British Chartered Financial Analyst Institute revealed that 77% of its members disagreed that investors acted rationally.
This implicit rejection of the Efficient Market Hypothesis has far reaching implications for the structure and management of capital markets, including Modern Portfolio Theory, the use of betas, the justification for index funds, and the M&M Theories.
Will the economists that proposed these theories return their Nobel prizes?
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