Not Everything About The EMH Should Be Thrown Away

This is a very succinct and to-the-point piece on the Efficient Market Hypothesis (EMH) by behavioral finance guru Richard Thaler. It turns out not everything about the EMH is to be thrown away.

The EMH has two components: the "price is always right" component and the "no free lunch" component. What Thaler says is that the latter has been strengthened by the financial crisis (what looked like a free lunch was in fact an over-leveraged mirage) while the former, the "price is always right" component, has been dealt a mortal blow (just because bubbles can only identified in retrospect doesn't mean they don't exist).