Here, maybe do some book learning. The evidence is mixed.SB1234 wrote: ↑Sun Sep 17, 2023 2:53 pmSaying that the evidence is mixed is a huge mischaracterization.SpanishInquisition wrote: ↑Sun Sep 17, 2023 2:11 pm
I don’t see anything resembling an axiom that markets are efficient. I am an EMH guy, and yet I would never accept that as an axiom. I that is what needs to be proven in order for the hypothesis to hold, and , even as an EMHer, Id know that the evidence is mixed.
I will let Eugene Fama and Richard Thaler tell you about it.
https://en.wikipedia.org/wiki/Efficient ... hypothesis
Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1, source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty-year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low." Burton Malkiel, a well-known proponent of the general validity of EMH, stated that this correlation may be consistent with an efficient market due to differences in interest rates.
Investors, including the likes of Warren Buffett, George Soros, and researchers have disputed the efficient-market hypothesis both empirically and theoretically. Behavioral economists attribute the imperfections in financial markets to a combination of cognitive biases such as overconfidence, overreaction, representative bias, information bias, and various other predictable human errors in reasoning and information processing. These have been researched by psychologists such as Daniel Kahneman, Amos Tversky and Paul Slovic and economist Richard Thaler.
Empirical evidence has been mixed, but has generally not supported strong forms of the efficient-market hypothesis. According to Dreman and Berry, in a 1995 paper, low P/E (price-to-earnings) stocks have greater returns. In an earlier paper, Dreman also refuted the assertion by Ray Ball that these higher returns could be attributed to higher beta,[clarification needed]; Dreman's research had been accepted by efficient market theorists as explaining the anomaly in neat accordance with modern portfolio theory.