I hate criticising the CFA Institute because, as a charterholder, I end up inadvertently bashing myself. Still, the organization’s historical commitment to the Efficient Market theories has always been frustrating to me. The CFA Institute counts among its members some of the brightest minds in finance…yet much of its curriculum supports a theory that has been proven time and again in the real world to be patently false and unrealistic. Belief in the efficiency of markets given the series of meltdowns over the past decade is almost as crazy as continuing to believe in communism as an economic model given the failure of the Soviet Union. Read the rest of this entry »

Most money managers in the business today were taught in business school that the market is “efficient,” meaning that are meaningful information is already factored into the current stock price.  The implications are that the current price is the “correct” price, the market is never wrong, and there is no value to doing financial analysis or to buying anything other than a passive index fund.Of course, few of those managers actually believe in the efficient market hypothesis, or they would have found a different line of work. 

Warren Buffet had this to say about the notions that market are efficient: Read the rest of this entry »