My latest Street.com column, "A Not-So-Efficient-Market Hypothesis" is up at RM.
It expands upon many of the ideas from earlier comments, Compare and Contrast.
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UPDATE: December 2, 2004 5:43am
Interesting article in the New York Times about surprising price patterns and inefficiencies in the Fine Art market:
Economists Have Advice for Buyers as the Art Market Heats Up
http://www.nytimes.com/2004/12/01/arts/design/01pric.html
I’ll paraphrase Barry Schiller here and say that you’re making a couple of leaps of logic. There is a big difference between saying markets are efficient and saying that they’re predictable(or more accurately predictable enough to offset management costs). Clearly the internet bubble and many other things have shot alot of holes in the efficient markets arguement. However, the argument for investing in index funds isn’t that the market is efficient or inefficient but rather as a whole investors must reap the markets returns before fees. However, after fees, the return to investors, in total, is less than what the market actually returned.
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