Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

  • bee October 2011
  • msf October 2011
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Fama's efficient market hypothesis and mutual funds

msf
edited October 2011 in Fund Discussions
Fama has honed his EMH so much over the decades that I'm not sure how much value there is in reading his early writings. Nevertheless, I was looking at Random Walks in Stock Market Prices, a brief (6 page), nonacademic paper from 1965.

I was struck by his statement he "reported the results of a study which suggest that if the initial loading charges of mutual funds are ignored, on average the funds do about as well as a randomly selected portfolio." Emphasis added. That performance would seem to include the effect of recurring expenses (management fees, trading costs, administrative expenses, etc.). So, if (all else being equal) one selected a portfolio of below average cost funds, it seems one would likely beat the market.

Seems strange, since this would contradict EMH (and provide a simple strategy for selecting mutual funds).

Comments

Sign In or Register to comment.