Quote from vladiator:
You do have a point. I was simplifying things a bit. If you take more advanced finance courses, typicially at the graduate/PhD level, you will get into instances of why/when/how markets can be inefficient (e.g. the Grossman and Stiglitz definition of market efficiency is by far a better one, that what Fama et al suggested originally). At the bacallaureate level, it is a bit too much.
The idea of teaching an undergrad student the basics of investing is like teaching someone to drive a car. Of course, if you invest more time and teach him (or especially her 
) to drive with the manual transmission and explain all the intricate nuances taking place as you engage the clutch etc etc, they will be a much better driver. But for their needs of getting from point A to point B and knowing as little about the process as possible (an average finance student just needs to learn how to build his retirement portfolio pretty much and needs to know what the broker/dealer/exchange do etc) just knowing what pedal to press is usually enough. I don't see the point of teaching everyone what Schumacher does and why just so they know how to drive. It's useful to tell they that they are such Schumachers and that the things they do are possible...
vladiator:
Hi all. I'm back. I haven't written in a while, but I like to add to this. I think most people in the general public - casual observers, investing publics, daytraders, and even institutional portfolio managers/traders - misintrepret the real idea behind EMH.
The real idea behind the EMH is that it's very very DIFFICULT to beat the market(popular index SP500 is NOT a really good representative of the market b/c it's weighted toward large cap rather than the entire universe of investable securities, bonds, real estate, etc.). But even given this misguided index- SP500- most money managers can't beat it year in and year out.
EMH didn't say it was impossible to beat the market. Obviously, the few talented supertraders(Market Wizards) and star portfolio managers(Buffet,Soros, Lynch, et al) can do it. But that's expected. Given a large enough population size, there will always be a few outliers that can beat the mean handsomely.
But on average, it's a horrendously difficult task. Though I went to a top academic finance program, I don't believe in EMH because I still think it's possible to beat the market but once has to be extra clever. That's why I'm TRADING! hehe. If it was so easy, then everyone would quit their day jobs and just trade for a living and making millions a year.
But it isn't easy. After transaction cost, commission, slippage, noise, etc. one has to make a return that is in EXCESS of the market to refute EMH. Remember, I said in excess of the market. Obviously one can make a living trading. There's no doubt about that. But does that mean one actually beat the market?
Look at broker/dealers. They earning very small returns(bid-ask spread) on a very very large capital base. So, Street is NOT interested in beating the market. Just making a return on capital. A business.
And individual investors/traders who can beat the market with their smaller account can boast about it. But the problem arises when SCALE comes into play. OK. Maybe it's "easier" to double your $100K account. But try doubling a $100M or $10B. Then becomes a totally nontrivial matter...Otherwise, if you can keep doubling, then you would pretty soon own the entire world.
Most people here probably use some TA, tape reading(i use both as well) and see that it does work in this instance and that. But that doesn't mean you actually beat the market. Perhaps these are the very ineffiicencies you saw and thus in the process of arbing it away you make the market more efficient and tougher for new traders.
On the flip side, having read tons of dry mathematical finance articles and papers, I do see a flaw in the way academics view the market vs what it actually is. But academics do spend a large amount of time studying data(not data-mining) and some do understand very well the nature of market microstructure(bid/ask, tape action,etc) and stuff that do occur on the minutely trading level. So, don't discount them as total ivy towers who has no connection to reality. That's old school.
But they do have flaws.
well. good luck to all.
trader99
