Menu Close

The Deficient Markets Hypothesis

Originally posted at Capitalstool by Jimbo.

So Russian bonds drop 50%.

How does the Efficient Markets Hypothesis explain that away.

Clearly the market was betting on peace….and got it wrong. There was clearly no discounting by the bond market of the clear and present danger of a war.

THE EMH should be replaced by the DMH.

In deficient markets asset prices cannot and do not discount the future or current information accurately.

1/ Future information is inherently unknowable and thus cannot be discounted to determine current asset prices.

2/ Even where information is known i.e. current information…. it is “Interpreted” by current actors to determine current asset prices. The “Interpretation” can be very very faulty. The interpretation depends on existing investor biases.

That’s why there is so much financial propaganda…to effect the biases…to effect the interpretation of information…..and thus effect the prices of assets …stocks …bonds …whatever.

3/ Asset prices are constantly changing because future information is constantly becoming current information and is being measured and interpreted to determine asset prices.

Or we can look at this as a QUANTUM FIELD effect.

Future prices are determined by fluctuations in the future information field (FIF)

The future information field interacts with the Price/Time field to create fluctuations in price over time…ie. a price chart.

Join the conversation and have a little fun at If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Follow by Email

Discover more from The Wall Street Examiner

Subscribe now to keep reading and get access to the full archive.

Continue reading