Conclusion
The main shortcomings of the EMH are similar to those of the long-run competitive theories that focus exclusively on equilibrium outcomes while ignoring the entrepreneurial activity that generates those outcomes. The EMH gives the impression that there is a difference between investing in the stock market and investing in a business. However, the stock market doesn't have alife of its own. The success or failure of investment in stocks depends ultimately on the same factors that determine success or failure of any business.
Statistical tests that supposedly validate the EMH framework are based on a flawed method and a failure to understand that the main cause behind the instability in financial markets is the monetary policies of the central bank.
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Additional information
Frank Shostak is chief economist at Ord Minnett Jardine Fleming Future, Sydney, Australia. The views expressed herein are his own and do not necessarily represent those of Ord Minnett Jardine Fleming Futures. The author wishes to express his gratitude to the very helpful comments of two anonymous referees.
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Shostak, F. In defense of fundamental analysis: A critique of the efficient market hypothesis. Rev Austrian Econ 10, 27–45 (1997). https://doi.org/10.1007/BF02538483
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DOI: https://doi.org/10.1007/BF02538483