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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (440)	11/3/2000 11:57:29 AM
From: Wayners	Respond to of 24758

To me the test of efficiency is in the charts. With 100% efficiency I'd expect every price move to be preceded by a gap up or gap down with no trades executed in between. The size and direction of the gaps would be 100% unpredictable...just like a plot of a coin toss chart--all stairsteps up and down. I also don't think prices would move or gap very often--only on real news not on supply demand imblance information. 100% efficiency would require achieving instantaneous price equilibrium and no supply/demand imbalances after new information is obtained. All participants would have to receive the same information simulataneoulsly and all agree exactly on the what the new price should be. In reality it takes time and trial and error to determine where the equilibrium of supply and demand will fall and there should be oscillations around the right level before price finally settles down and balances (Samuelson Economics). Thats the reality and what we do is capitalize on those oscillations for profit because nobody can eliminate the trial and error period and supply/demand imbalances in a short period of time. Liquidity, float, varying pricing models all add to the inefficiency.