GDB FIN630

Efficient Market Hypothesis claims that “No one should be able to outperform the market” but we still see some investors making abnormal returns. It means that markets are not efficient.
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1.your right markets aren't efficient simply because you have big institutional player who control most of the flow and the smaller individual investors who trade the scraps so the market was never going to beefficientt in this kind of situation. However the efficientt market Hypothesis doesn't real say that there shouldn't be outperformance, it merely states that every one has access to the same information and therefore no one has an advantage. but of course we know that in reality there's inside information and some are able to use information more quickly than others. marlek is not perfect.
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2.an efficient market has maximum competition. which wouldnt allow for infair trades, and means everyone pays the appropriate price. that means the market is absolute and noone gets a better price than another.


the fact that we see people outperforming the market and people underperforming the market means that the market is not efficient. but only efficient with the meaning: there is no maximum competition.
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3.Markets are somewhat efficient, but it is just a theory. There are many investors and money managers who consistently and regularly beat the market. Over 10% of the mutual funds out there also beat the market in any given year. The market is not near the free-market we suppose it to be. Special groups and different individuals can tamper with the markets, postponing what might normally occur (think of central banks). Also, a prominent financial news channel may selectively expose reps from a certain industry or sector. They can pound the table on an idea or personality and lead a large group of investors around by the nose.