Bryan Caplan and David Henderson

Efficient Markets Hypothesis

A Category Archive (24 entries)

Economics must be harder than it looks

Economic Philosophy
Scott Sumner
Mark Sadowski sent me this paper from Paul Davidson, which he thought was hilarious: There are two different major economic theories that attempt to explain the operation of the money using, entrepreneurial economy that we call capitalism and its financial... MORE

How Many Bad Loans Did Fannie and Freddie Originate?

Efficient Markets Hypothesis
Garett Jones
Trick question: None, zero, zilch.  By law, Fannie and Freddie can't originate loans--they can only buy or guarantee loans that have already been made by actors in the private sector.  This is no small point, but it's a point that... MORE

An Answer to Truman's Prayer?

Efficient Markets Hypothesis
Arnold Kling
Claudia Goldin, William Nordhaus, Richard Schmalensee, and Anil Kashyap write, Each week since late September, along with 37 other economists at top universities, we have been answering questions on major public policy issues... Schamelensee was on my dissertation committe. President... MORE

Armen Alchian

Efficient Markets Hypothesis
David Henderson
In this month's Featured Article, Fred McChesney pays tribute to the work of Armen Alchian and makes the case that he deserves the Nobel prize in economics. I already knew most of what McChesney writes because, after all, I studied... MORE

Investing Wisdom from a Wise Guy

Finance: stocks, options, etc.
David Henderson
Not that kind of wise guy; actually a wise man. Take a look at this extended interview of investment adviser Less Antman, whom I've occasionally quoted on this blog. Apart from his advocacy of diversifying by investing in commodity futures,... MORE

Work-Safe Readings for Macro

Austrian Economics
Arnold Kling
In response to my post on the porn that is modern macro, readers naturally asked me for alternatives.... MORE

Arbitrage Challenge

Efficient Markets Hypothesis
Bryan Caplan
Suppose the following: 1. You know now that the price of oil will be flat for five years, then fall by 10% per year every year thereafter. Everyone else thinks the price will be flat forever. 2. The longest oil-futures... MORE

Stock Indexing Empire Strikes Back

Finance: stocks, options, etc.
Arnold Kling
John C. Bogle and Burton G. Malkiel write, We concede that there is some evidence, based on numbers compiled by Ibbotson Associates, that long-run excess returns have been earned from dividend-paying, "value" and small-cap stocks -- albeit returns that are... MORE

Hamilton on Bernanke on Bubbles

Finance: stocks, options, etc.
Bryan Caplan
James Hamilton leaps to defend Ben Bernanke's skepticism about housing bubbles. As a guy who bought a Northern Virginia home in 2000, I sure hope they're right.... MORE

Fama vs. Thaler

Efficient Markets Hypothesis
Arnold Kling
Stephen Bainbridge judges the contest. As for regulators, because the ECMH [Efficient Capital Markets Hypothesis] is often brought to bear as a justification for deregulation in politically charged policy disputes, such as mandatory corporate disclosure and insider trading, those who... MORE

Oil Bubble?

Efficient Markets Hypothesis
Arnold Kling
Any time a price increases rapidly, somebody argues that there is a bubble (although I have not heard anyone proclaim a health care bubble). Here is Frank P. Leuffer on oil. IEA figures for the first half of the year... MORE

The Wisdom of Crowds?

Efficient Markets Hypothesis
Arnold Kling
Are "predictions markets" more effective than other mechanisms at making forecasts and decisions? This issue has been given a lot of publicity, starting with a now-scotched proposal to set up a terrorism futures market. Professor Bainbridge weighs in. As for... MORE

Backwardation

Efficient Markets Hypothesis
Arnold Kling
As of May 20th, the June 2004 futures contract for light crude oil was at $41.66, while the June 2005 futures contract was at $35.58. When futures prices are below spot prices, this is known as "backwardation." I believe that... MORE

Various Articles

Regulation and Subsidies
Arnold Kling
Posting here will be infrequent until later in October. Meanwhile, here are some links that may be of interest. Is the insecurity of Microsoft software an externality that should be regulated or taxed? An example of professional licensing as rent-seeking... MORE

Are Small Investors Irrational?

Finance: stocks, options, etc.
Arnold Kling
Hal Varian's column cites research on the irrationality of small investors during the dotcom bubble. First, there were significant differences of opinion about the value of Internet stocks, with retail investors tending to be much more optimistic than insiders or... MORE

Comment of the Week, 2003-06-18

Efficient Markets Hypothesis
Arnold Kling
On the topic of resisting efficient markets, 'rvman' wrote, Put all of your money in index funds. For five years, pick stocks and invest with monopoly money, matching your real original investment in your fake portfolio. If you can beat... MORE

Bond Market Bubble?

Finance: stocks, options, etc.
Arnold Kling
Followers of the market for U.S. government bonds have started tossing around the term "bond bubble" with increasing frequency. The concern is that interest rates on long-term Treasuries have gotten so low that investors face high risk (if interest rates... MORE

Resisting Efficient Markets

Efficient Markets Hypothesis
Arnold Kling
Columnist James Glassman discusses the Efficient Markets Hypothesis with John Allen Paolos, author of A Mathematician Plays the Stock Market. If you believe in the EMH, you understand that highly successful stock selections are really just lucky guesses... But, to... MORE

Stock Market Regulation

Finance: stocks, options, etc.
Arnold Kling
'Jane Galt' casts doubt on the deterrence value of the settlement in which Wall Street investment firms agreed to pay a large fine. I don't want this to be the opening act in some morality play, directed by Spitzer, in... MORE

Comment of the Week, 2003-04-02

Efficient Markets Hypothesis
Arnold Kling
On the issue of index investing, Yasser Mawji wrote Surely there's a problem of aggregation that's inherent to index fund investing. If most investors are blindly purchasing index funds without any regard for valuation, then those stocks which constitute the... MORE

Can you Beat the Market?

Efficient Markets Hypothesis
Arnold Kling
Financial columnist James Glassman touts a study by Joshua D. Coval, David A. Hirshleifer, and Tyler G. Shumway that shows that some investors were able to beat the market consistently. This conflicts with the efficient markets hypothesis. The authors write,... MORE

Inefficient Market?

Efficient Markets Hypothesis
Arnold Kling
If you believe in efficient markets, then you should be very skeptical of the rest of this post. Ohio State's J. Huston McCulloch, a leading authority on bond pricing, said on 2003-01-31, Frankly, stocks are so reasonably priced relative to... MORE

Stock Prices and Scandals

Finance: stocks, options, etc.
Arnold Kling
Jeff Madrick describes disparate economic views on whether stock prices should guide managers. The modern theory typically depends on the idealized efficient-markets theory, which asserts that at any given moment the stock price is not only the best measure we... MORE

The Risk Premium

Finance: stocks, options, etc.
Arnold Kling
Surfing while snowbound, somehow I started with this post on Asymmetrical Information and wound up reading this article by Robert D. Arnott and Peter L. Bernstein on the equity risk premium. It is an exhaustive study that covers many fundamental... MORE

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