Market Efficiency Myths and Misconceptions (EP.183)

<p>While there is certainly room for rigorous debate regarding market efficiency versus inefficiency, there are many who dismiss Eugene Fama’s Efficient Market Hypothesis (EMH) as an incorrect model without understanding what the implications are or how to test it. In today’s episode of the Rational Reminder Podcast, we tackle some common market efficiency myths and misconceptions using Fama’s 1970 paper on EMH as well as supporting papers by Kenneth French, Lubos Pastor, José Scheinkman, and many others. You’ll also hear about behavioural finance, quantitative investing, human bias, and momentum as they relate to market efficiency before debunking some anecdotal misconceptions about EMH involving Warren Buffet and Renaissance Technologies. In addition to our fascinating main topic for today, you’ll get a glimpse into the four waves of a career in Cameron’s review of <em>The Long Game</em> by Dorie Clark and Benjamin shares some notes and corrections regarding the user cost model from Episode 180: Is Canada Really in a Housing Bubble? We also discuss housing as a depreciating asset, innovation stocks in deep value territory, and the size of innovation platforms relative to global market cap and what that means for investors, plus a whole lot more. Make sure not to miss this jam-packed episode for everything you need to know (and forget) about market efficiency!</p> <p> </p> <p><strong>Key Points From This Episode:</strong></p> <p> </p> <ul> <li>Kicking off with a book review of <em>The Long Game</em> by Dorie Clark. <strong>[0:10:53]</strong></li> <li>Four waves of a career as per Dorie Clark: learning, creation, connecting, reaping. <strong>[0:13:04]</strong></li> <li>Benjamin readdresses the user cost model from Episode 180 on the Canadian housing bubble (or lack thereof). <strong>[0:16:06]</strong></li> <li>Insights from the user cost model regarding price sensitivity and rate changes. <strong>[0:20:13]</strong></li> <li>Addressing common confusion regarding housing as a depreciating asset. <strong>[0:22:53]</