I’m afraid the argument was a straw man from the start. Only the so-called “strong form” EMH says that prices are always right. Most economists and even more practitioners have long understood that there are inefficiencies in the market—after all, the market is efficient because departures from efficiency are exploited, driving prices toward efficiency. For most of us, the inefficiencies are too small or too fleeting to be exploitable. For a few, those who are either much smarter than everyone else, or got there earlier, or have the most efficient trading algorithms, there do exist exploitable inefficiencies. It’s no coincidence that mispricings used to be much, much larger in the past than they are now, as trading costs have declined and computer algorithms of increasing speed and sophistication have been deployed.
Strong form doesn’t mean that the prices are “always right” the idea of strong form EMH is that the prices also already incorporate private information (meaning you can’t get alpha even if you had insider information) compared to Semi-strong that claims that the markets don’t account for private information.
The definition of EMH (from wikipedia) is:
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to “beat the market” consistently on a risk-adjusted basis since market prices should only react to new information.
There was no straw man, I have specifically reflected on this definition.
I’m afraid the argument was a straw man from the start. Only the so-called “strong form” EMH says that prices are always right. Most economists and even more practitioners have long understood that there are inefficiencies in the market—after all, the market is efficient because departures from efficiency are exploited, driving prices toward efficiency. For most of us, the inefficiencies are too small or too fleeting to be exploitable. For a few, those who are either much smarter than everyone else, or got there earlier, or have the most efficient trading algorithms, there do exist exploitable inefficiencies. It’s no coincidence that mispricings used to be much, much larger in the past than they are now, as trading costs have declined and computer algorithms of increasing speed and sophistication have been deployed.
Strong form doesn’t mean that the prices are “always right” the idea of strong form EMH is that the prices also already incorporate private information (meaning you can’t get alpha even if you had insider information) compared to Semi-strong that claims that the markets don’t account for private information.
The definition of EMH (from wikipedia) is:
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to “beat the market” consistently on a risk-adjusted basis since market prices should only react to new information.
There was no straw man, I have specifically reflected on this definition.