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The Efficient Market Theory

Chart Forum » Does Technical Analysis Really Work? » The Efficient Market Theory

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new2waix
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Username: new2waix

Post Number: 540
Registered: 10-2003

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Wednesday, February 25, 2004 - 10:46 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The IC academics out there will probably know all about the 'efficient market theory', but for those who don't, here is a link:

http://www.investorhome.com/emh.htm

Some exciting bed time reading :-)






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cyph
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Registered: 09-2004

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Saturday, September 25, 2004 - 08:52 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I think I remember one of my courses at Uni saying something about this! ;)







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mick_lucas
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Friday, December 24, 2004 - 10:48 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



There are valid points and reasoning put forth in the EMH, but in the opinion of better investors than I, it does not take into account the irrational, unintelligent emotional reactions to price movements that investors inevitably make. If would be a more accurate theory if all investors were to act according to their heads and not their hearts.

A good example is provided by a hypothetical disaster (natural, terrorism, etc) that causes core blue-chip stocks to plummet in price. Those investors who buy up the now-cheap stocks in these good businesses support the EMH, but the "sheep" who sell their now "worthless" shares are acting irrationally, and the EMH doesn't really encompass these movements.

But otherwise it looks pretty good.


Mîçhâê1 Lûçâš

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