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any thoughts on the efficient-market hypothesis?

I've been subscribing to the Financial Times the past couple of years because its a refuge from all the typical noise that typifies tabloids (for example when I get my FT delivered tomorrow morning I'm pretty sure it won't have a picture or headline of farrah fawcett or michael jackson).

Anyway one thing that caught my eye in the FT the other day was an article about the death so to speak, of the efficient-market hypothesis (EMH). Personally I never did believe in EMH, because I can't imagine players in an economic system being able to digest all the information and price risk accordingly. In other words, EMH is an oxymoron IMHO because an economic system is not a totally efficient means of transmitting a signal to all the players, who can react to information in an infinite number of ways and at their own speed.

To illustrate the point of how various people react vary differently to the same information, lets suppose that we present a random number of people a collection of ancient text. To make my illustration, somewhat thought provoking the "data" I'm thinking of is a collection of ancient text otherwise known as the BIBLE. Like everything else in like its always a subjective call, as to whether the data set collected can illuminate any useful information. For example to a believer, the bible is the world of "God" therefore such a person would take offense to someone looking at the bible as just collection of mythologies of a very primitive and very superstitious society.

In my mind EMH never was a valid hypothesis because of the simple fact, its human nature not to all react the same way to a given set of data. For example in my case I've never given a damn about michael jackson, or in the case of the bible, I've never been able to believe that it is the literal word of an omniscient supreme being. While one the other hand a devout believer and michael jackson fan would interpret the sudden unexpected death of the king of pop, as perhaps being some kind of sign...

Just, kinda wondering what other people interested in economics, make of the efficient-market hypothesis, care to share your thoughts on the topic?

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Comment by Spencer Thompson on August 13, 2009 at 8:15pm
Great blog on how the EMH just hasn't passed muster when subjected to empirical testing:

http://www.economist.com/blogs/freeexchange/2009/08/lucas_roundtable_the_emh_must.cfm

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