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An economist and his friend are walking down the street when the friend sees a ten dollar bill on the sidewalk. “Look,” he says, “it’s a ten dollar bill”. “Non
by tgrass 13y ago
An economist and his friend are walking down the street when the friend sees a ten dollar bill on the sidewalk.
“Look,” he says, “it’s a ten dollar bill”.
“Nonsense,” says the economist. “If that was a ten dollar bill, someone would have picked it up by now.”
- Symmetry 13y agoI'm (and economists) aren't saying that there are never $10 bills on the sidewalk, just that they don't stay there for long after someone notices them. Stock prices went down on the weekends for decades before someone noticed. But once it was noticed it stopped pretty quickly.
- tgrass 13y agoUnderstood. No offense, just being goofy.
- mikeyouse 13y agoI'm more interested in the persistent market inefficiencies; growth vs. value, January effect, low P/E, all interesting examples that haven't been arbitraged away.
- someben 13y agoCheck out the behavioral finance literature, like the Shleifer book: http://www.amazon.com/Inefficient-Markets-Introduction-Behavioral-Clarendon/dp/0198292279 http://www.amazon.com/Inefficient-Markets-Introduction-Behav...
- apalmer 13y agoI am just trying to double check to make sure I understood so bear with me. Are you telling me that stock prices systematically went down for decades and no one took this into account to make money? there is hope after all...
- a1k0n 13y agoThere's always someone on the other side of a trade.
- kragen 13y agoMost of the time, the economist is right about that: the vast majority of ten-dollar-bill-appearing things found on sidewalks are obviously not real ten-dollar bills once you pick them up. They're advertisements for nightclubs or get-rich-quick schemes and whatnot.