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View Diary: Nobel Prize for Economics = neo-liberal swinefest UPDATED (197 comments)

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  •  She's a little under the weather (1+ / 0-)
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    Sparhawk
    isn't it odd that with all this "science" . . .
    you never seem to have gotten rich in the stock market
    I've done quite well by investing in low cost index funds, exactly as you would expect based on Fama's work.

    I've also done very well by diving in when everyone else is panicking - for example buying financial stocks at the end of 2008.  That's contrary to Fama's work, but I'm not an Efficient Markets absolutist.

    I personally believe that markets are mostly efficient but that there are certain obvious inefficiencies (ie. due to the fact that humans and even computers take finite time to react markets cannot instantly move based on all available information but will instead take milliseconds or longer).  In times of major market disruption (ie. 2008) normal price setting mechanisms may not work because so many player have exited the market and because the utility function for those who remain is biased to stay with the herd because you can always explain to investors if you lost money when everyone lost money but you can't explain if you lost money when other people made money.

    But that doesn't mean that Fama French isn't incredibly important or that EMH doesn't pretty much define our current understanding of asset markets.

    •  um . . . . (3+ / 0-)
      Recommended by:
      Sandino, Selphinea, katiec
      I personally believe
      I thought economics is, ya know, a science.  Why would science give a flying fuck what you personally believe or not?
      •  Science does not care, but people do (0+ / 0-)

        As an example, anthropic global warming is science, but the details are hotly debated and different scientists have different beliefs... including some who believe that the current level of anthropic global warming is low enough that it is lost in the normal climate variation noise.

        Statistics is a science (or, arguably, even more fundamental - math does not depend on experiment and observation), but the statistical techniques used to calculate global warming rates are still hotly debated.  For example, the famous "hide the decline" quote was about removing tree ring data from the final years of the analysis because in recent years, when we have good data from other sources, tree ring data seems to have become uncorrelated from temperature.  However, this obviously leads to complex questions about whether historical tree ring data should then be kept and about whether the process of removing uncorrelated data when it disagrees with our other measurements but keeping data that may not be linked to temperature but, due to random variation, appears correlated is artificially inflating the significance (used in its mathematical sense) of the temperature results.

        In the same way, what Fama does is on the edge between science and math, and there is little question that it is mathematically correct, but understanding exactly how it applies in the real world with all of its complications is very complex and people disagree about it.

        •  AGW is not a science. AGW is a concept. (1+ / 0-)
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          Sandino

          Climatology is a science.  AGW is a specific possible scenario predicted by that science.

          That aside, the specifics of the current warming trend are not up for much debate. We know how much warming we've experienced, with only a few small questions as to where all of the energy has gone. It's the future impact and potential for acceleration of the trend which is debated.

          * "Power attracts the corruptible. Suspect all who seek it." - Frank Herbert * (-9.38; -8.15)

          by Selphinea on Thu Oct 17, 2013 at 09:51:35 PM PDT

          [ Parent ]

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