I think some markets are basically efficient and very difficult to beat. The public stock market is one. I’m not convinced by the AI example basically due to priors—we’ve seen many many people claim to be able to beat the public markets without special information, with evidence that seems much more convincing than this, and they are on average wrong. So I don’t think at least this argument overcomes my priors.
However less liquid markets are for sure beatable. The prediction markets around the election are one. Crypto is another—I personally have done well not just investing in crypto but by co-founding a hedge fund that has actively traded crypto for 3 years, many trades per day, making a trading profit (earning alpha) on 1081/1093 days. (And the losing days were all very small, each well below a day’s average profits.)
I also sit on an investment committee for an endowment and see what returns can look like in private markets where it’s possible to have a high informational advantage and turn that into outsized returns.
So to me, the EMH is mostly true for highly liquid highly accessible markets. But for illiquid, less accessible, lower information markets, there is money to be made for people willing to put in the effort.
Whether it’s worth the opportunity cost is also another question, it’s not like it’s hard to make money lots of ways if you are motivated and smart. Crypto is a fun hobby for me, like poker used to be, and I like to make money from my hobbies. Not everyone wants to spend their free time looking for EV in weird places.
I think some markets are basically efficient and very difficult to beat. The public stock market is one. I’m not convinced by the AI example basically due to priors—we’ve seen many many people claim to be able to beat the public markets without special information, with evidence that seems much more convincing than this, and they are on average wrong. So I don’t think at least this argument overcomes my priors.
However less liquid markets are for sure beatable. The prediction markets around the election are one. Crypto is another—I personally have done well not just investing in crypto but by co-founding a hedge fund that has actively traded crypto for 3 years, many trades per day, making a trading profit (earning alpha) on 1081/1093 days. (And the losing days were all very small, each well below a day’s average profits.)
I also sit on an investment committee for an endowment and see what returns can look like in private markets where it’s possible to have a high informational advantage and turn that into outsized returns.
So to me, the EMH is mostly true for highly liquid highly accessible markets. But for illiquid, less accessible, lower information markets, there is money to be made for people willing to put in the effort.
Whether it’s worth the opportunity cost is also another question, it’s not like it’s hard to make money lots of ways if you are motivated and smart. Crypto is a fun hobby for me, like poker used to be, and I like to make money from my hobbies. Not everyone wants to spend their free time looking for EV in weird places.