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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (48057)	2/20/1999 1:07:00 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 132070

>>EMH requires two basic things, one, rapid information dissipation (made possible by the internet and other mass media) and two, rapid incorporation of interpretation based on information into security prices (made possible by liquidity and short-term trading opportunities).<< EXACTLY. why do you need rapid information? b/c the information is supposed to represent reality. why is reality important? i already said that it is one KEY to EFFICIENCY. now, why is interpretation into stock prices important? BINGO, 6that is the other KEY to EFFICIENCY. just as i stated. i think the information is available. so the first leg is firm. however, the interpretation that folks make and the way it reflects in the stock price is where the incredible inefficiency comes. there is a disconnect in stock price between the reality as known by available information and, voila, inefficiency. all over the market. one example. a dram shortage was predicted in 1998 when, in fact, all data suggested otherwise. it was possible to call the down turn and many folks did. but, not the stock of mu as it hit new highs right before collapsing like a popped balloon. so, why the poor interpretations? emt causes folks to not do any analysis b/c 1. they believe their analysis is futile and the stock price "knows all," 2. wuv for a stock, 3. past price action is used, however irrationally, as a gauge of future results, 4. greed, 5. hope, 6, investments based on possibility rather than probability, and a few more. of cours, there are bear market psychologies that impact irrational interpretations, but we'll worry about that when we get there... ;-)