Institutional Investors in the Future

[ep510]

How many years do you guys think it'll take before investing becomes so much of a science that it can be automated to the degree that the market becomes efficient?

20 years? 50 years? Never? And why?

Given that number, how profitable do you think it would be to pursue a career in that field (given all the talk about this lately) at the present (I'm 20)?

[stinkypete]

if you can be the guy who automates the market to become efficient, i can promise you its worth pursuing.

[Joe Tex]

No person will ever be able to automate the market to the degree it becomes efficient. This is a fact for two reasons.

First, Markets can only ever be efficient if two factors exist. Investors in that market have perfect information, both of current circumstances and future occurences - obviously, this is impossible. For example, investors could have predicted that in late 2001 terrorists would fly into the WTC and cause a substantial downturn in the market.

Secondly, efficiency of the market requires that participants in the market are rational beings. This is simply not the case. Markets need to be seen as aggregations of fear and greed in tension with each other. They may be broadly rational at times and over time but as a reliable measure of value at any individual point in time, they only have relevance at the point of sale.

Sam

[ep510]

I use "efficient" in the vague term of the word: How soon would it be before the business and its profitability slow down considerably because it is asymptotically approaching maximum efficiency.

[hedgeyerbets]

no faster than it will happen in any other business

[SlowHabit]

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efficiency of the market requires that participants in the market are rational beings.

[/ QUOTE ]