Efficient Markets Quotes:

Risk comes from not knowing what you're doing.

- Warren Buffett

topic: Life, Business, War, Best Investment, Market Risk

If I subscribed to the efficient market theory I would still be delivering papers

- Warren Buffett

topic: Paper, Theory, Stills, Efficient Markets

The efficient market theory is one of the better models in the sense that it can be taken as true for every purpose I can think of. For investment purposes, there are very few investors that shouldn't behave as if markets are totally efficient.

- Eugene Fama

source: "A Father of Modern Finance" by Rebecca Rolfes, www.chicagobooth.edu. 2013.

topic: Taken, Thinking, Purpose, Efficient Markets

Investment students need only two well-taught courses - How to Value a Business and How to Think About Market Prices

- Warren Buffett

topic: Thinking, Two, Taught, Efficient Markets

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

- Warren Buffett

source: Berkshire Hathaway Inc. Chairman's Letter, www.berkshirehathaway.com. 2005.

topic: Stars, Business, Loss, His Loss, Isaac

I am not well qualified to criticize the theory of rational expectations and the efficient market hypothesis because as a market participant I considered them so unrealistic that I never bothered to study them.

- George Soros

source: George Soros' Remarks at the Festival of Economics, www.georgesoros.com. June 2, 2012.

topic: Expectations, Study, Theory, Efficient Markets

In an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value.

- Eugene Fama

topic: Intrinsic Value, Security, Values, Efficient Markets

There is no other proposition in economics that has more solid empirical evidence supporting it than the Efficient Market Hypothesis... In the literature of finance, accounting, and the economics of uncertainty, the EMH is accepted as a fact of life.

- Michael Jensen

topic: Investing, Literature, Facts, Empirical Evidence, Efficient Markets

I have a name for people who went to the extreme efficient market theory-which is "bonkers". It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.

- Charlie Munger

topic: Reality, Names, Ties, Efficient Markets

The possibility that stock value in aggregate can become irrationally high is contrary to the hard-form "efficient market" theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by "rational man" models of human behavior from economics and too little by "foolish man" models from psychology and real-world experience.

- Charlie Munger

topic: Real, Men, Foolish Man, Efficient Markets

To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses - How to Value a Business, and How to Think About Market Prices.

- Warren Buffett

source: Richard J. Connors, Warren Buffett (2010). “Warren Buffett on Business: Principles from the Sage of Omaha”, p.152, John Wiley & Sons

topic: Business, School, Thinking, Efficient Markets, Pricing

Berkshire's whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you'd have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.

- Charlie Munger

topic: Believe, Thinking, Ideas, Tooth Fairy, Efficient Markets

The sad truth is that it is precisely those who disagree most with the hypothesis of efficient market pricing of stocks, those who pooh-pooh beta analysis and all that, who are least able to understand the analysis needed to test that hypothesis.

- Paul Samuelson

topic: Investing, Tests, Able, Efficient Markets, Sad Truth

Although efficient markets people still go around saying there is a "mountain" of evidence supporting their hypothesis, the truth of the matter is that it's a very old mountain that's now eroding rapidly into the sea.

- Robert Haugen

source: "The Inefficient Stock Market - What Pays Off And Why". Book by Robert Haugen, ch. 1, Introduction, p. 2, 1999.

topic: Sea, People, Mountain, Efficient Markets

Value investing is predicated on the efficient market hypothesis being wrong.

- Seth Klarman

topic: Investing, Hypothesis, Values, Efficient Markets

Seven habits that help produce the anything-but-efficient markets that rule the world. 1. Think short term. 2. Be greedy. 3. Believe in the greater fool 4. Run with the herd. 5. Overgeneralize 6. Be trendy 7. Play with other people's money

- Paul Krugman

topic: Running, Believe, Thinking, Trendy, Efficient Markets

Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency.

- Ben Bernanke

topic: Change, Years, Kind, Labor And Capital, Resiliency

If we don't like rent control, we ought to oppose it on political and social grounds - and not just by arguing that, thanks to smartphones and social networks, we can create new, more efficient markets for matching short-term renters with tenants.

- Evgeny Morozov

topic: Smartphones, Political, Matching, Rent Control, Efficient Markets

Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?

- Warren Buffett

source: Chairman's Letter to the Shareholders of Berkshire Hathaway Inc., www.berkshirehathaway.com. 1987.

topic: Doctors, Two, Advice, Hedging, Allegory

In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.

- George Soros

source: "Theory of Reflexivity". George Soros' speech at the MIT Department of Economics World Economy Laboratory Conference in Washington, D.C., www.valuewalk.com. April 26, 1994.

topic: Would Be, Fundamentals, Normal, Disequilibrium, Efficient Markets

When I started eBay, it was a hobby, an experiment to see if people could use the Internet to be empowered through access to an efficient market. I actually wasn't thinking about it in terms of a social impact. It was really about helping people connect around a sphere of interest so they could do business.

- Pierre Omidyar

topic: Business, Thinking, Ebay, Social Impact, Efficient Markets