Tyler Cowen: uncertainty

Transcript context

…Why is it not easy to retrospectively study how efficient markets were back then, in the same way we can study it now? You look at the price-to-earnings ratios, and then what were the dividends afterwards over the coming decades for those companies based on their stock price or something? I don’t know how many publicly traded firms there were in Britain at that time. I don’t know how good the data are. Things like bid, ask, spread, at what price you actually executed trades can really matter for testing efficient markets hypothesis, so probably we can’t tell, even though there must be share price data of some sort. At what frequency? Well, is it once a day? Is it once a week? We don’t have the sort of data we have now where you can just test anything you want. He also made an interesting point. Not only is it not profitable, but even if you succeed, society will look at the contrarian in a very negative light. You will be doubly punished for being a contrarian. But that doesn’t seem to be the case. Right? You have somebody like Warren Buffett or Charlie Munger. People who do beat the market are actually pretty revered. They’re not punished in public opinion.…

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