Sunday, September 7, 2008

Not in real time

I'm traveling, dear reader, so for the next few posts on this website you'll be reading material I prepared weeks ago and scheduled for these dates.

Hope you enjoy it nonetheless.

To dive in, here's a link to a fascinating paper by Andrew Lo, a professor at MIT.

Lo is discussing the efficient market hypothesis, which (a) seems to have a powerful logic to it, but (b) runs into important counter-examples in the world of fact.

Lo believes there is a way to 'save the appearances,' to reconcile theory and fact in the world of financial economics.

For tomorrow's entry, I've summarized Lo's theory as I understand it. You can wait until then, or you can just follow the link, read his paper, and make up your own mind what he's saying and how far it is valid.

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