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Blindsided by Jonathan Gifford

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The Rational Market

The rational-market argument is more subtle than it might seem at first glance. According to this new economic orthodoxy, which is known as the ‘efficient-market hypothesis’, the market price does not merely reflect all of the informed judgements of large numbers of buyers and sellers: all of these judgements might, after all, be wrong or, more likely, and as seems to happen often in real life, to be coloured by unreasonable optimism or pessimism. The efficient market hypothesis takes us way beyond the notion that a market price is an extremely good indication of what a large number of people feel to be the right price for any particular asset. The problem word in that last sentence, for efficient-market economists, would ...

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