[Anheg]

Everyone is at least somewhat arguing about market efficiency it seems. I'm sure all the finance guys already know this, but for those who don't: Efficient market theory basically says that you can't earn abnormally high returns relative to risk. I don't know what I believe regarding this, as there are levels.

Weak form efficiency means that price movements are only affected by new information (Random movements), thus past prices can't predict future prices. This is based on the only two things affecting a company's value are cash flows and risk. If weak form is true, there goes technical analysis as I understand it.

Semi-strong form efficiency says all public information is quickly and correctly priced into assets. Many academics and people in general believe in this at least somewhat and thus use indexes or structure porfolios to their risk preference and do not actively trade.

Some explanations for people that do beat the market (relative to risk is important) from efficient market guys: 1. The percentage that they beat the market by is their value of adding new information to the market through better analysis, whatever. 2. The extra percentage points are due to the extra time spent thus opportunity cost. 3. Those that beat it are outliers and are getting lucky basically. 4. This pertains to Buffett especially: they influence the future cash flows through their investment by being on the board, whatever.

I know this doesn't really answer anything but hopefully it provides some background for those who hadn't heard of this concept.