Nick D’Urbano Starts a Blog
July 10, 2010 2 Comments
One of the Montreal Junto’s members has started a blog! Here’s an excerpt from his post on the efficient free market hypothesis:
I was recently stuck in traffic. For some reason I was also trying to explain to a buddy of mine, with a non-finance background, the concept of efficient markets; namely efficient market hypothesis (EMH). It then dawned on me that traffic reacts in a very similar manner to efficient markets. Let me elaborate:
Imagine the act of switching into a lane as going long a certain asset (buying), while switching out of a lane as going short a certain asset (selling).
Click here to head on over and find out more!
Thanks for the post D’Urbano. Very interesting!
The common denominator in your analogy is that we all suffer/profit from human behaviour/psychology, be it in everyday situations such as driving or in financial markets. I’m a big proponent of behavioural finance when it comes to debating EMH.
On a broader note, I’m convinced that one should act upon his/her independent conviction, know how and what others are thinking so to avoid the herd bias. I think one can be very succesful leaning against belly of the normal distribution curve and be long the fat tail optionalities. Their is much value to independent thinking in the world we live today. When everybody think the same, nobody is really thinking.
I couldn’t agree more Nic! I especially like the way you phrased that last sentence: “when everybody think the same, nobody is really thinking”. Well put.