The New York Times ran a pretty amazing story this weekend which spoke to the difficulty mutual funds have with consistently outperforming their peers. The data point that was particularly jaw-dropping is that just 2 out of the 2,862 funds observed were able to live in the top 25% of performers for the four years ending in March 2014.
What is truly astonishing is the loudest opponents of efficient markets are typically the same people that are most persecuted by the fact that for the most part, markets are efficient. It reminds me of a video I saw on Vice recently; an interviewer went down to Texas to speak to the people about a severe drought that has been plaguing their economy and lifestyle. Like under performing traders laughing at the EMH, these kids- in the eye of the storm- were laughing at the idea that the planet is undergoing a climate change. As the nation’s cattle population falls to 87.7 million — the lowest its been since 1951 and prices rising to all-time highs, we see that Cognitive dissonance is a powerful phenomenon.
I’m not sure that markets at all times accurately reflect all known and unknown information, but I do believe that markets are efficient in the sense that an infinitesimally small number of people can consistently outperform the markets. The fact that you can be a market participant for more than a few weeks and still deny this is truly remarkable.