Are Some Markets Less Efficient?

While fund managers often say they add value for investors in smaller, lesser known markets because those markets are inefficient, The Wall Street Journal’s Jason Zweig says the data shows otherwise. “If it were true that money managers can more easily beat inefficient than efficient markets, then the differences would be easy to see,” Zweig writes on “Total Return”, the Journal’s personal finance blog. “But that’s not the case.” Citing Standard & Poor’s data, Zweig says that “over the three years ended in mid-2011 (the most recent data available), 64% of large U.S. stock funds failed to beat the S&P […]

Behavior Finance Pioneer on Efficient Markets, Bubbles

Richard Thaler, the researcher whose work has brought such key behavioral finance issues as myopic loss aversion to light, says recent events have shown markets are not efficient, but that they are still the best way to employ capital. “Counting the earlier bubble in Japanese real estate, we have now had three enormous price distortions in recent memory,” Thaler wrote in The Financial Times. “They led to misallocations of resources measured in the trillions and … the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be ‘right’, then these bubbles would not occur. […]