Wei Dai made a coronavirus trade now up 700%, remarking "At least for me this puts a final nail in the coffin of EMH." Wei was already on my shortlist of EMH challengers. This genuinely isn't looking great for EMH.
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As Wei Dai observes, the problem here isn't one profitable trade, it's that going up 8X is "...implying that as of 2/10/2020 the market thought there was less than 1/8 chance things would be as bad as they are today", which seems really hard to defend epistemically!
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Hmm. It's always seemed obvious to me that the EMH can't literally be true, given that someone needs to make the trade that fixes a price discrepancy.
Why wouldn't we just say that Wei Dai is pretty good at being that person?
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The standard story involves small discrepancies fixed quickly. This was (allegedly) a large discrepancy that hung around for a while.
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"Wei Dai and Will Eden can beat the market, and the next time they tell me who might be President I'll listen even if the prediction markets say something different."
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For what is worth, you were also suspicious when the market didnt drop after Trump got elected.. and nothing too bad to it happened after (other bad stuff did ofc). Maybe dont abandon your strong beliefs based on weaker evidence than the evidence that led you to them.
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The problem wasn't that I disagreed with the market about disaster probabilities - I updated immediately when the market did - it was the degree to which the market disagreed with itself about Trump/disaster correlation before vs. after election night.
Sorry, this is really weak evidence against the EMH. Surprised to hear this take.
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