Markets Are Efficient Information Processors
Description
Financial markets efficiently incorporate all available information into asset prices, making it impossible to consistently achieve returns that beat the market average through skilled stock selection or market timing.
Falsification Criteria
This conjecture would be falsified if: (1) A specific investment strategy demonstrates returns exceeding the market average by at least 15% annually over a minimum 10-year period while controlling for risk factors; (2) The strategy must be documented in advance with clear rules and tested on out-of-sample data; (3) At least three independent research teams must be able to replicate the results by December 2026; (4) The strategy must account for transaction costs, market impact, and survivorship bias.
Bounty
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Rational criticism and counterarguments to this conjecture
The efficient market hypothesis doesn't account for well-documented behavioral biases like loss aversion and overconfidence, which create predictable patterns in market pricing that can be exploited by systematic trading strategies.
Renaissance Technologies' Medallion Fund has consistently generated returns of over 60% annually for decades, far outperforming market averages even after accounting for risk. Their systematic approach uses mathematical models to identify market inefficiencies, proving that markets are not perfectly efficient.
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