by Tim Price
In their efforts to jam the square peg of financial theory into the round hole of human nature, economists have perpetrated some pretty stupid things.
But few of them are dumber than the efficient market hypothesis (EMH).
EMH states that it is impossible to beat the market because the efficiency of the market means that prices always incorporate and reflect all relevant information.
Why was the Dow Jones Industrial Average worth 22.6% less on Tuesday October 20, 1987 than it had been the previous day?