EMH: Moving On

Jonathan Davis has written a good piece on his Independent Investor blog about market efficiency here.

Quoting Andrew Lo of MIT:

“Market efficiency” he says “cannot be evaluated in a vacuum, but is highly context dependent and dynamic, just as insect populations advance and decline as a function of the seasons, the number of predators and prey they face, and their abilities to adapt to an ever-changing environment”. What is at work in financial markets, he believes, is a Darwinian process of “survival of the richest”.

Davis points out some of alternatives to the Efficient Market Hypothesis and its failings. Though he notes that these alternatives lack the direct practical application that the EMH has. Worth a read.