FT Guide to Exchange Traded Funds and Index Funds, 2nd Edition

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A quick primer on the theory – or how we got here

‘An “efficient” market is defined as a market where there are large numbers of rational, profit-maximizers actively competing with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants.’

Eugene Fama¹

‘There is an old joke, widely told among economists, about an economist strolling down the street with a companion when they come upon a $100 bill lying on the ground. As the companion reaches down to pick it up, the economist says “Don’t bother – if it were a real $100 bill, someone would have already picked it up”.’

Andrew Lo and Craig MacKinlay²

Step back in time to the era of progressive ...