By
Borsgade
In his latest paper titled ‘The Less-Efficient Market Hypothesis’ AQR’s Cliff Asness explains why he believes markets have become less efficient over the past 30+ years due to technology, gamified trading, and social media.
This inefficiency raises the stakes for rational active investing, with bigger and longer-lasting market swings. Investors should embrace this opportunity but remain cautious of strategies that might not perform well long-term.
Asness stresses the importance of sticking with sound investment principles despite volatility. While indexing is a reasonable choice for some, active value and quality stock picking may offer better opportunities.
Here are the key takeaways:
Good investing has always been a challenge combining a) discerning what is right, and b) sticking with what is right. Both have always been vital and both still are. But if markets are indeed “less efficient” the first task has actually gotten easier and the second harder — and the skills needed to pursue good investing have shifted. That tells us what we should work on going forward.
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