The Astonishingly Inefficient Market

Friday, January 27, 2006 | 10:30 AM

One of the themes we keep coming back to is the so called efficient market hypothesis. We simply don't buy into the near religous belief that markets are perfect, omniscient processors of information.

Instead, we find markets are eventually, mostly, kinda efficient. They very often miss what in hindsight is obvious. Its why prediction markets' value are often limited.

Today's example comes from a NYT article about ENRON, the biggest ever corporate bankruptcy in the United States.

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click for enormo graphic

26enron_graphic_lg

graphic courtesy of NYT (for an even more enormous graph, click here)

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Where, pray tell, is the efficiency there? The information that Enron was giant fraud was out, and yet the stock took over a year to collapse.

Efficient? P'shaw . . . 

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Source:
Big Test Looms for Prosecutors at Enron Trial
KURT EICHENWALD
NYT, January 26, 2006
http://www.nytimes.com/2006/01/26/business/businessspecial3/26enron.html

Friday, January 27, 2006 | 10:30 AM | Permalink | Comments (16) | TrackBack (2)
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» Handle With Care from Now This Is a Soap Box
I think Barrys post, while on point, misses the forest for the trees for 99% of investors (I appreciate the fact that Barry has a large pro readership).  Sure, there is a lot of talk, academic research and otherwise, that refutes ... [Read More]

Tracked on Jan 27, 2006 12:49:38 PM

» Enron Rebuts Efficient Market Hypothesis from Jotzel - The Best Business News
If all the bad news about Enron... [Read More]

Tracked on Jan 27, 2006 3:25:56 PM

Comments

A ship the size of the Titanic takes hours to sink. There is time to make other plans.

Posted by: Fred | Jan 27, 2006 10:37:25 AM

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