[extropy-chat] You're Fired

Robin Hanson rhanson at gmu.edu
Tue Oct 17 10:26:50 UTC 2006


At 05:31 AM 10/17/2006, Bill K wrote:
>On 10/16/06, Robin Hanson wrote:
> > Claiming that stock markets do not contain all possible 
> information, and so
> > are not perfectly "efficient," is very different from claiming 
> that they are
> > completely random and contain no info whatsoever.   My proposal only
> > needs markets to contain a bit more info than the other processes one
> > might use to fire CEOs.
>
>Obviously markets do not contain all possible information. Equally
>obviously markets contain *some* information. But markets also contain
>much wrong information, 'noise', rumor, fashion, 'follow the herd' and
>other nonsense. The accumulation of all that correct and incorrect
>data makes stock movements unpredictable. i.e. random. ...
>Robin, you don't seem to appreciate how random stock movements are,
>within the general boom - slump business cycles.  Every year random
>stock picking competitions are done which do just as well or better
>than the financial professionals. (Leading to much huffing and puffing
>and excusing by aforesaid professionals).
>Market movements are unpredictable, meaningless and random.
>It's not a problem. That's just the way life is.

Again, the question is how much information the prices contain, relative to the
other methods one could use to fire CEOs.   You have not addressed that issue.
If the prices are more informed, then they will make better choices and should
be preferred.

Of course we could do even better if the prices were even more informed.
That is where you could help.   Since you can see that the current 
prices are all
wrong and you can tell in which direction they are wrong, you can make lots of
money by buying low and selling high.   And you will help make the prices more
accurate in the process.   Win win for all, surely.   Do come back and thank us
when you are rich.



Robin Hanson  rhanson at gmu.edu  http://hanson.gmu.edu
Associate Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326  FAX: 703-993-2323 




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