(Jumping ahead a bit on the blog, some previous scheduled posts were not posted)
On the morning of December 30, 1985, as president of the American Finance Association, Fischer Black gave the yearly presidential address. What usually is a 45-minute speech, Black gave in 15 minutes and stunned the audience by what he said. His speech consisted of explaining how most of the time almost all markets are efficient, and distinguishing the difference between financial and economic efficiency. For much of Fischer’s career he had been arguing against what he said in his speech. People in the finance world were well aware of Fischer’s unorthodox views, and were surprised that he was beginning to see things from a wall-street point of view. However, Fischer had been thinking along these lines since 1982, before he entered the wall-street world.
C for Rooster - not just a typo, but a repeated typo. Fool me once, shame on me, fool me twice, you get a C.
ReplyDeleteBlack is making an interesting assertion here: how far can price deviate from value when markets are efficient.
This is a useful question to ask a student who is doubtful about efficient markets. Consider the analogy: how far can your body temperature vary from 98.6 without you being sick? Clearly, there is some acceptable range there. Efficient markets work the same way: how big is the range that we're comformtable calling efficient? For Black it was 50-200%.