Wednesday, January 30, 2008 7:06:00 AM
Hi Tom,
I think it just proves that the Efficient Market hypotheses is a load of bunk.
The reason the EMH doesn't work is that it assumes the market is informed and rational as we know, rationality is the last thing you find in the area of finance.
Anyway, even if there were a pinch of rationality out there.
A person decides to buy a stock on the assumption of some future return.
Each person may decide on a different required return that would satisfy them and so be prepared to buy at different prices and so that is no 'right' price to buy at.
People have asked "Wouldn't AIM become useless if everybody used it" well, assuming everyone bought the stock at the same price and had exactly the same parameters set up then maybe it wouldn't work but the likelihood of that happening are about as remote as a snowfall in Adelaide during February
Regards
Neil
I think it just proves that the Efficient Market hypotheses is a load of bunk.
The reason the EMH doesn't work is that it assumes the market is informed and rational as we know, rationality is the last thing you find in the area of finance.
Anyway, even if there were a pinch of rationality out there.
A person decides to buy a stock on the assumption of some future return.
Each person may decide on a different required return that would satisfy them and so be prepared to buy at different prices and so that is no 'right' price to buy at.
People have asked "Wouldn't AIM become useless if everybody used it" well, assuming everyone bought the stock at the same price and had exactly the same parameters set up then maybe it wouldn't work but the likelihood of that happening are about as remote as a snowfall in Adelaide during February
Regards
Neil
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