During discussion about things where you had strong opinions and then changed your mind, someone mentioned EMH. Do you believe in EMH and if so is it strong or weak version?
I used to believe EMH but not strongly. The pandemic changed my view because I managed to invest some money when the stock market dived and was clearly influenced by overly pessimistic view of the impact of covid. Some might argue that the market reacted to the irrational government measures, so it is not that the case that the market was mistaken. I still think that investors were equally irrationally pessimistic. I reject the view that this is a hindsight and I was merely lucky. I am not big expert and I did not possess any proprietary information. I had the same information as everybody else, I just didn't let my emotions take over me. This is further confirmed that even today when all the events have passed exactly as predicted, majority of people still maintain their mistaken views that covid was very dangerous to young and non-risk population.
It is the only time when I saw the rest of the society to be so wrong in their views and clearly this was my once-a-lifetime chance. I haven't see any other opportunities for easy money so far but I think that people who are experts in their fields and investors might have been able to find more opportunities.
One of them was found by Michael Burry who definitely saw that the 2008 financial crisis was coming. He wasn't just lucky because he had read and analysed all the documents and had to create special investment instruments to profit for it. In this way, it wasn't easily accessible by laypersons like me who have no time or understanding about investment. Again, most professionals were blinded by collective frenzy.
What is your opinion about EMH?
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Notes -
As far as I can tell the semi-strong EMH (the only one worth using) says that insofar as markets are zero sum games, they have no winning strategy for average players. This is the type of insight only an economist could consider insightful. You can sometimes "beat" the market when
You're playing a different game - for example certain risk profiles are much more valuable to you relative to others.
You have privately acquired information (either by circumstance or hard work)
You're lucky
The market does sometimes generate what seem like blunderous mis-valuations, but they're hard to mine in advance.
I hesitate to call something obvious when so many people don't believe it at all.
Fair point. My hot take is that, of the spectrum of things called the EMH, the correct variations are obvious and the non-obvious variations are incorrect. I'm very happy to be educated to the contrary, however.
A lot of people seem to think they can regularly beat the market with skill. Yes, plenty of "regular" people (although only some of them are stupid, others are probably scientists or engineers who are overconfident in their abilities). But it seems like lots of experienced finance professionals are convinced of their own ability to beat the market, even when the evidence shows most of them are over-indexing on luck or are just plain wrong. Some of this is surely marketing by people who know they're full of shit, but I suspect there is a lot of genuine belief because no one wants to accept their job is adding minimal value and they've put tremendous time into studying something but aren't any good at it.
Maybe these people all believe in the EMH for other people and think that they're special, but I would still call that "not really believing in EMH."
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