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In a recent article, Gillian Tett (FT 2010) highlighted the importance of emotional factors in markets. Also, the recent subprime crisis has somehow led to a questioning of the so-called efficient market hypothesis (EMH). Actually, the EMH has been one of the main Finance paradigms since Fama’s (1970) seminal work. The central tenet is that information is rapidly integrated into prices. The goes as follows. As information is rapidly integrated into prices, you cannot beat the market, except by chance, unless you are systematically faster in getting information. If you are systematically faster in getting information, you are highly likely to have insider information.
Thus, on average no investor, unless he has insider information, should be able to beat the market. The...
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