Efficient Market Hypothesis (EMH) - An hypothesis which states that the price of a security is a reflection of all available information about it and thus represents its true value. It states also that the current price of a security is the most appropriate measure of future returns.
But in real world there is no such thing. Investment bankers, brokers, vested interests all use all the weapons including academia to ensure that people believe in the EMH. Here is an excerpt from an article that makes the point clear.
" We already know that Lehman and other firms used fake accounting to hide liabilities and inflate assets; that lenders and securitizers frequently knew that the loans they sold and packaged were fraudulent or defective; and, of course, we also now know that Goldman Sachs and other investment banks sold securities they knew to be defective (they were often sold to pension funds for low-paid government employees, by the way) -- and that they designed many of these securities so that they could profit by betting against them after they were sold."
No comments:
Post a Comment