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30 sats \ 6 replies \ @grayruby 4 May \ parent \ on: MONEY CLASS OF THE DAY: Market Efficiency: You Come Into MYYYYY HOUSE?! econ
I am defining based on the market's ability to accurately price based on current information and expected future events.
I think it's the concept of accuracy that I'd question here. How would you know if a price at any given moment is "accurate"?
I agree that markets are becoming more self referential, but if you factor that self referentiality into what you consider as relevant information then I'm not sure what it means to say that the market is not efficient
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What about bitcoin that has no revenue?
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Typical commodity markets are likely priced fairly efficiently based on expected supply and demand. Bitcoin I am not so sure. We have known production but we can't anticipate demand very well and at what prices supply will unlock as people sell to take profits. I think the Bitcoin market will be highly efficient when it is 10x the size.
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I think my overall point is that the notion that price should reflect net present value of earnings is itself a bit of a philosophical/theoretical construct
It's related to the last period problem that makes some people like Eugene Fama say that bitcoin can't have value
If these are just theoretical concepts. In practice most people are just looking at what price they can flip the stock at after X years... the theoretical infinitely lived agent that looks like the present discounted value of earnings just doesn't exist in reality
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I agree. I think the whole concept is mostly academic busywork and markets price based on what participants are willing to pay for something whether they are forced buyers (passive) or not. So in that sense the market is efficient at reflecting the result of that supply and demand. I am just trying to work within the paramaeters of the theory for arguments sake.