The Efficient Market Conjecture

Ricardo Emanuel Campos Dias de Sousa and David Howden

MPRA Paper from University Library of Munich, Germany

Abstract: Although commonly misconstrued as a statement about the “correctness” of prices, the Efficient-Market Hypothesis (EMH) is a statement about their informational content. The aftermath of the recent recession has brought renewed skepticism to EMH, even leading some to redefine it as the inefficient market hypothesis. We demonstrate that such a change is misguided, as it changes the nature of the input (i.e., the market) but not the truth value of the statement (i.e., whether markets are efficient). We further outline several logical fallacies of the Hypothesis which negate its usefulness. We conclude by showing that the EMH was never a hypothesis and as such is best considered a conjecture. As a conjecture, it is increasingly difficult to reconcile with actual market behavior.

Keywords: Efficient markets; informational efficiency; EMH; equity returns (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

Published in Quarterly Journal of Austrian Economics 18.4(2015): pp. 387-408

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79792

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