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Politics : Ask Michael Burke
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To: pater tenebrarum who wrote (68731)10/6/1999 6:02:00 PM
From: BGR  Read Replies (1) of 132070
 
Heinz,

So, Merton and Scholes believed that inefficiencies existed, tried to exploit that and failed miserably. That proves to you that the market is inefficient!? In the short run, indeed, going long or going short makes no difference in a perfectly efficient market as equities have the same probability to go up as down. However, I said long term, right? Long term, in an efficient market price is indicative of value, and if the economy grows in an inflation adjusted way (as it has always done historically, as productivity has increased) going long is expected to be more profitable than going short.

-BGR.
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