Why stockmarket prices are unreliable predictors of the future
By
The Economist
A weekday bagel. Dependable, satisfying, no fuss.
Summary
This article critiques the efficient-market hypothesis, arguing that stockmarket prices are influenced by far more than just new information. Using a humorous analogy comparing economists to horse-studiers, it suggests that financial theory often fails to reflect real-world trading floor realities. The piece is a brief opinionated commentary on the limitations of economic models in predicting the future through stock markets.
Key quotes
· 3 pulledIf economists wished to study the horse, they wouldn't go and look at horses. They'd sit in their studies and say to themselves: 'What would I do if I were a horse?'
But at least horses tend to be spared such attention; finance types do not.
One economic idea is especially liable to get them snorting with impatience and asking whether the person who cites it has been near a trading floor.
You might also wanna read
Understanding the Efficient Market Hypothesis: From Bachelier to Modern Finance
This article explores the Efficient Market Hypothesis (EMH), tracing its origins from Louis Bachelier's early 20th century work through its
3quarksdaily.com·7mo ago
Why the Economics of AI Don't Add Up: A Critical Analysis of the AI Bubble
This article critically examines the economics of the AI industry, arguing that the financial models underpinning major AI companies like Op
Ed Zitron's Where's Your Ed At·1mo agoWho Wins and Who Loses in Prediction Markets? Evidence from Polymarket
Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets
Reflection on Failed Economic Crash Prediction and Analysis of Economic Indicators
The author reflects on their failed prediction from last year that the US economy would experience a significant crash comparable to 2008. T
wilsoniumite.com·4mo ago
Media's Growing Obsession with Prediction Markets Raises Concerns About Political Discourse
The article critiques the media's growing obsession with prediction markets like Polymarket, using a CNN clip about Greenland gambling odds
theatlantic.com·4mo ago