Wolf vs Siegel: EMH Smackdown

October 30, 2009 9:00am by Barry Ritholtz

You might have missed yet another smackdown yesterday: A debate on the Efficient Market Hypothesis in the FT vs the WSJ:

• Martin Wolf: How mistaken ideas helped to bring the economy down (FT)

• Jeremy Siegel: Efficient Market Theory and the Crisis (WSJ)

My read is Wolf trounced Siegel, but as a non-fanboy of EMH, I am biased.

My own short but devastating critique of Fama’s EMH, which according to Siegel, “states that the prices of securities reflect all known information that impacts their value.”

That assumes that their is nothing in the price that is non-informational in nature — no emotion, no panic, no greed.

That is simply wrong. It is the fundamental failure of EMH.

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