Here’s a thought experiment: Suppose that a market is perfectly efficient, except that every 50 years or so there’s a crash, which sufficiently smart people can predict a month in advance. Would you say that this market is efficient? Technically it isn’t, because smart people have a systematic advantage over the market. But practically, no trader systematically beats the market, because no trader lives long enough!
I suppose you can create a long-living institution, a “black swan fund”, that very rarely makes bets on predictable crashes, and over a few centuries can prove it has higher returns. But I guess not enough people care about returns over these timescales.
Here’s a thought experiment: Suppose that a market is perfectly efficient, except that every 50 years or so there’s a crash, which sufficiently smart people can predict a month in advance. Would you say that this market is efficient? Technically it isn’t, because smart people have a systematic advantage over the market. But practically, no trader systematically beats the market, because no trader lives long enough!
I suppose you can create a long-living institution, a “black swan fund”, that very rarely makes bets on predictable crashes, and over a few centuries can prove it has higher returns. But I guess not enough people care about returns over these timescales.