An Alternative Hypothesis to Market Efficiency

On repeated occasions, Eugene Fama has claimed that critics have failed to offer a complete alternative to the efficient market hypothesis (EMH). More specifically, in his Noble speech, Fama said, “Most important, the behavioral literature has not put forth a full blown model for prices and returns that can be tested and potentially rejected – the acid test for any model proposed as a replacement for another model.” Here I argue that Fama’s complaint is too strong.

By Brad Cornell