EMH Paradox

"The market is more efficient on the banks of the Charles River than the banks of the Hudson."

- Fischer Black, after leaving his MIT professorship to join Goldman Sachs, confessing to the reality of financial market versus Eugine Fama's eminent Efficient Market Hypothesis. He is best known as the co-creator of the renowned Black-Scholes option pricing equation which received the 1997 Novel Price in Economics. The Nobel committee prominently mentioned his key role, however not awarded him due to his earlier death by cancer. Novel Price is not given posthumously.



"So you're Fischer Black. Nice to meet you. Let me tell you something. You don't know shit about options."

- Upon his arrival at Goldman Sachs as the chief of Quantitative Strategies Group, Black was brought to the firm's options desk to meet the head of trading. The trader said, reaching out a hand to greet the living legend.






- The paradox of EMH : The idea that the market is an efficient, randomly churning price processing machine has many odd consequences. Fama postulates a vast, swarming world of investors constantly searching for inefficiencies, those hungry piranhas circling in wait of fresh meat. Without the hungry piranhas gobbling up juicy fleeting inefficiencies, the market would never become efficient. Would the piranhas exist without the fresh meat? No fresh meat, no piranhas. No piranhas, no market efficiency. It's a paradox that continues to baffle EMH acolytes.