**Comment of the Day: Robert Waldmann**: *Cognitive Science, Behavioral Economics, and Finance*: "There are two separate questions. One is "are markets efficient?", which means there always is no winning arbitrage strategy. The other is "is there an arbitrage strategy which will always work?"...

...The confusion occurs because existential qualifiers don't commute. For any market for any time t, there is a strategy S which is better than buying and holding the market = "the efficient markets hypothesis is false" != For any market there is a strategy S which is better than "buy the market", and that strategy will be better for all time.

The efficient markets hypothesis matters, because, with additional assumptions (which are false but most economists don't understand this) it implies that free markets are Pareto efficient. The case for prudential regulation does not depend on the assumption that there is one strategy which beats the market now and always will beat the market. One can't commute "for every" and "there exists a".

Also Fama's empirical research consists of repeated proofs that markets aren't efficient, always followed by a conclusion stating that they are. Andrei Shleifer once said "The great thing about Fama is that his theoretical beliefs have no effect on his research"...

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