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The Market Can Only Know What is Knowable

Eugene Fama explains why recent asset price volatility is entirely consistent with the efficient markets hypothesis.

posted on 12 August 2009 by skirchner in Economics, Financial Markets

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He certainly doesn’t look 70 to me - maybe it’s the cream outfit. I generally accept the EMH and what Fama says about recent volatility. But at the same time, I maintain investments in the Platinum Asset Management funds, which have (again) outperformed over this cycle, as they did in the erly 2000s and more generally since their formation in 1995. Their founder, Kerr Neilson, also reputedly bought puts before the ‘87 crash when working for BT.

Posted by .(JavaScript must be enabled to view this email address)  on  08/14  at  09:41 PM


There is no doubt Platinum has consistently outperformed, but how could you have known this ex ante?  I have met very few active fund managers who could persuade me to shift my money out of indexed or risk-free return strategies, not least because so many have incorrect views about how asset prices are determined and economic fundamentals.

The economist talking heads for most wealth management businesses in Australia should be enough to deter you from investing in their active funds!

Posted by skirchner  on  08/16  at  04:40 AM


There is no doubt Platinum has consistently outperformed, but how could you have known this ex ante?

Well, I only invested in 2004, so by then, they had already outperformed through the tech wreck. I also did some research and found out about Neilson’s history at BT. Going forward, I certainly have enough faith to keep paying the extra 1% fees to keep my money there instead of in an index fund.
I agree most of the Australian fund managers don’t sound very impressive. I have some money with Prime Value, as they have a good track record and keep a low profile, but I also have a large proportion in an index fund.

Posted by .(JavaScript must be enabled to view this email address)  on  08/16  at  09:21 PM


Reading Prime Value’s ‘investment philosophy’ I’m not sure whether they agnostic, eclectic or just confused!

Posted by skirchner  on  08/17  at  04:41 AM



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