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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.

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