Why the efficient markets hypothesis caught on

By Felix Salmon
August 11, 2009
long answer (HarperBusiness, 400 pages, $27.99), and then there's the short answer, courtesy of Emanuel Derman:

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Why did the efficient markets hypothesis catch on as virulently as it did? There’s the long answer (HarperBusiness, 400 pages, $27.99), and then there’s the short answer, courtesy of Emanuel Derman:

The EMH does recognize one true thing: that it’s #$&^ing difficult or well-nigh impossible to systematically predict what’s going to happen. The EMH was a kind of jiu-jitsu response on the part of economists to turn weakness into strength. “I can’t figure out how things work, so I’ll make that a principle.”

See? Economists are scientists, after all. That which they can’t explain, they turn into an axiom.

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