Comments on: Is the Stock Market Efficient?

By: Avoiding Hedge Fund Investments is One of the Benefits of Being in the 99% at Curious Cat Investing Blog

Mon, 02 Apr 2012 05:14:53 +0000

“These incentives to take huge risks do mean a few hedge funds do spectacularly well each year (of course more usually do spectacularly poorly over time).

Warren Buffett knew this and wagered a long term investment in a low cost Vanguard S&P 500 Index fund would beat a hedge fund over the long term…”

By: Ted

Ted — Tue, 13 Sep 2011 02:08:24 +0000

I forgot to mention that I think your blog is pretty cool. I am a bit of an economics geek so I am into the subjects you are talking about here. Very clean well written posts that got me to think a little bit.

By: Ted

Ted — Tue, 13 Sep 2011 02:07:06 +0000

John,

I believe that markets are almost perfectly efficient (except for spreads) while the market is open and would be much more so if the markets were open 24/7. After all, at any given moment in time, a stock’s price is a pretty close to the actual collision of supply and demand for that stock.

I think that market inefficiency increases as you move in time frames up to about a month long period. Then I think it gets more efficient again as you extend the time frame out more than a one month period.

As you look at markets over the course of years, they are very efficient indeed. What other better representation could you possibly have for the real equilibrium of supply versus demand for any given stock?