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Mom posted

Efficient Market Theory, index funds, hedge funds and any other latest and greatest will work for a while. About the time you hear about them, they have changed market behavior and will stop working. Kind of a financial Heisenberg Uncertainty Principle<G>

Just kicking this thought around a bit because we hear it or at least read it often enough. I'm curious if we believe this to be true because we hear it often enough or is something else going on.

The theory behind this is that market inefficiencies are noticed, taken advantage of by enough people that the the inefficiencies disapear. In essence enough people join to force reversion to the mean. The method becomes the average maker or at least one of the average makers.

Is the cause and affect assumed here justified? Do other factors explain a reversion to the mean?(assuming reversion to the mean isn't a myth lol). Do market cycles play a greater roll then numbers of method adherents? Do macro economics play a greater roll then numbers of method adherents?

any thoughts?

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