Efficient markets’ failure hamstrung central banks: CentralBanking.com panel
Reliance on efficient markets hypothesis to develop policy frameworks must be reversed, LSE’s Brandon Davies and Fathom director Danny Gabay argue
The efficient markets hypothesis was one example of a failed theory used by central banks to develop policy frameworks and rules, two out of three panellists at a CentralBanking.com web seminar on Tuesday said.
The theory, first expounded to a wide audience in May 1970 by Eugene Fama, at present a professor at the University of Chicago's Booth School of Business, states that market efficiency means that prices tend to incorporate and reflect all relevant information about an asset.
Brandon
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