Mama Bear,
I think that Mr. Buffet is overstating the academic position wrt efficient markets. Let me present the EMT in a nutshell. It broadly comes in 3 flavors:
1. Weak form of market efficiency claims that past prices (distinct from information or analysis) are no indicator of future prices. IOW, TA is of no use. There has been enough research which indicates that this is in general true for most markets. (I think WB will also agree.)
2. Semi-strong form of market efficiency claims that all available public information (like earnings reports and dividends) is fast incorporated into prices, so fast that it is not possible to consistently profit from public information. Again, there has ben enough research which indicates that this is in general true for a market like the present one where information flows at a fascinating pace and short-term trading opportunities abound, resulting in rapid price fluctuations and adjustments. (Again, I think that WB will agree.)
3. Strong form of market efficiency claims that all available private information and analysis is fast incorporated into prices to make profit opportunities impossible. IOW, insider trading and better analysis and prediction capacities are also of no use in such a market. Frankly, there has been little proof that this is true, WB himself is a counterexmaple. And no academician will ever claim that the strong form of market efficiency holds.
However, they will most definitely claim that research shows that there are very few exceptions and in general the average investor should not pin his/her hopes on becoming an exception.
The URL that you provided seems to indicate that some have found an interesting approach to better analysis. The problem with better analysis is that it is either reproducible, hence everybody uses it and nobody has any edge, thus making the analysis worthless for the average investor, or it is not reproducible, hence only the creator can use it, thus (again) making it worthless for the average investor.
-BGR. |
