Skeptics of EMH argue that there exists a small number of investors who have outperformed the market over long periods of time, in a way which is difficult to attribute to luck, including Peter Lynch, Warren Buffett, George Soros, and Bill Miller. [...] Adherents to a stronger form of the EMH argue that the hypothesis does not preclude - indeed it predicts - the existence of unusually successful investors or funds occurring through chance.
—Wikipedia page for Efficient-market hypothesis.
During the “Manhattan project” (the making of nuclear bomb), Fermi asked Gen. Groves, the head of the project, what is the definition of a “great” general [1]. Groves replied that any general who had won five battles in a row might safely be called great. Fermi then asked how many generals are great. Groves said about three out of every hundred. Fermi conjectured that considering that opposing forces for most battles are roughly equal in strength, the chance of winning one battle is 1⁄2 and the chance of winning five battles in a row is 1/2^5 = 1/32 . “So you are right General, about three out of every hundred. Mathematical probability, not genius.” The existence of military genius was also questioned on basic philosophical grounds by Tolstoy [2].
—This paper on arXiv.
No comments:
Post a Comment