FT columnist John Authers has been writing a lot lately about the problems of efficient market theory. And now he's written a review of my book. A sample:
The theory has now completed its journey from “hypothesis” to “fact”
to “myth”, to borrow from the title of Justin Fox’s excellent new
history of the idea. Fox, a respected US financial journalist, covers
ground that ranges from the notion of market efficiency – that market
prices always incorporate all available knowledge about a security,
with the corollaries that stocks will follow a “random walk” and that
it is impossible to beat the market in the long term – to the panoply
of models for measuring risk and pricing derivatives that came with it.
It is a history going back a century of how the idea came into
being, and of the motivations of the economists who developed it. Fox
makes painfully clear that the men who drew up the theory knew from the
start that its assumptions, such as that stock returns follow a
“normal” or bell-curve distribution, were unrealistic.