Thread by @mjmauboussin

ICYMI - latest on the topic of market (in)efficiency. Focuses on 4 areas of potential opportunity: behavioral, analytical, informational, and technical (BAIT). And now for brief discussion of the journey...
bluemountaincapital.com/wp-content/upl…

2/Peter Bernstein's book, Capital Ideas, made a huge impact on me. A wonderful telling of how many of the big ideas in capital market theory developed. You have to understand these ideas to have proper context for a discussion on market efficiency.
amazon.com/Capital-Ideas-…

3/Peter Bernstein also wrote, Against the Gods: The Remarkable Story of Risk, which traces the path of the intellectual understand of risk. Also a must read. But Capital Ideas came first. amazon.com/Against-Gods-R…

4/These ideas collided with my first exposure to the idea of complex adaptive systems. @MitchWaldrop 's great book, Complexity, documents the early days of @sfiscience and explains many of the big ideas. amazon.com/COMPLEXITY-EME…

5/ This led to the first report I did on this. It is to this day the hardest report I have ever written. I called it Shift Happens to suggest that ideas such as complex adaptive systems, including concepts such as self organized criticality, are essential. people.stern.nyu.edu/adamodar/pdfil…

6/ I exchanged some letters -- yes, real letters -- with Peter Bernstein that led to two more reports. These were also an attempt to advance my understanding.
turtletrader.com/pdfs/CapitalId…
hurricanecapital.files.wordpress.com/2015/02/capita…

7/ This paper from the Journal of Applied Corporate Finance was a spin off from that e-m-h.org/Maub02.pdf

8/The efficient market hypothesis is wrong, but one of its practical suggestions--that most people shouldn't try to beat the market--is reasonable. See @R_Thaler clear distinction between "price is right" and "no free lunch." edge.org/response-detai…

9/But price discovery and liquidity rely on active managers. That won't go away, although one can debate how many active managers are necessary to achieve sufficient efficiency. Efficiency is an important societal good. Fin.
papers.ssrn.com/sol3/papers.cf…