how can markets be both noisy/random and highly efficient at the same time?
Q: "How can markets be both noisy/random and highly efficient at the same time
> if someone is prepared to trade at bad prices, there's a competitive race to take the other side.
> that effectively pushes prices back towards where they should be
> the PnL of traders taking the other side can be thought of as payment for pushing the market back towards "good prices"
> identifiable pricing inefficiencies will be exploited for profit in this way
> what tends to remain is the stuff that is unforecastable and unexploitable
> so what remains looks like noise
> and rational things that *should* persist, such as discounts for risky stuff (risk premia.)
a practical definition of market efficiency is "it's hard to make money trading cos those folks with the microwave towers have eaten all the obvious arbs"
beep...boop