Market efficiency and relevance of finance taught at universities

There are a few topics that I remember discussing as a student with my professors in Finance class, however most of the time we would discuss the efficiency of the markets, the CAPM model, the risk-free asset and how the last 40 years have changed so much, much thanks to Fama and his breakthrough research paper on the Efficiency of Markets (refer to the attached pdf on a paper re: the above topic).

In my Masters thesis paper I got the opportunity to really discuss the efficiency of the markets, as mentioned by Fama. However, looking back it seems that the efficiency of the market is not always true. It may be true during certain instances, for example during the boom years, however it is certainly not true when there is a financial crisis. The logic is simple; if the market was really efficient, and it readily absorbed all of the information, and came to a valid AND true conclusion regarding the price of a particular security, then there would be no bubbles.  Certainly we know that is not true.

Welcome to the real world, dear Finance Students.

Theory: What you learn at school may not be applicable in real life.

Lemma: Having more degrees does not make you more knowledge and/or expert in your field.

Corollary:  You just wasted 4 years of life, or more.


Welcome to layman’s finance.


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