Munich Personal RePEc Archive

The Efficient Market Conjecture

Campos Dias de Sousa, Ricardo Emanuel and Howden, David (2015): The Efficient Market Conjecture. Published in: Quarterly Journal of Austrian Economics , Vol. 4, No. 18 (2015): pp. 387-408.


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Although commonly misconstrued as a statement about the “correctness” of prices, the Efficient-Market Hypothesis (EMH) is a statement about their informational content. The aftermath of the recent recession has brought renewed skepticism to EMH, even leading some to redefine it as the inefficient market hypothesis. We demonstrate that such a change is misguided, as it changes the nature of the input (i.e., the market) but not the truth value of the statement (i.e., whether markets are efficient). We further outline several logical fallacies of the Hypothesis which negate its usefulness. We conclude by showing that the EMH was never a hypothesis and as such is best considered a conjecture. As a conjecture, it is increasingly difficult to reconcile with actual market behavior.

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