The DOI matches its Crossref record; 78 of the 78 references it cites were found in a registry or an index; none of the 51 sources its claims cite is checked for support yet.
The Efficient Market Hypothesis and Its Critics
Abstract
Revolutions often spawn counterrevolutions and the efficient market hypothesis in finance is no exception. The intellectual dominance of the efficient-market revolution has more been challenged by economists who stress psychological and behavorial elements of stock-price determination and by econometricians who argue that stock returns are, to a considerable extent, predictable. This survey examines the attacks on the efficient market hypothesis and the relationship between predictability and efficiency. I conclude that our stock markets are more efficient and less predictable than many recent academic papers would have us believe.
Overview
AI snapshot
Written from the paper’s full text.
TL;DR
Malkiel surveys challenges to the efficient market hypothesis from behavioral finance and predictability research and argues that stock markets remain far more efficient and far less predictable than critics claim. He concludes that documented anomalies are generally not robust or exploitable after transactions costs and that professional investors rarely beat broad index funds.
Key findings
- Predictability claims exist but are weak or unreliable: Fama and French (1988) found 25–40% of the variation in long holding-period returns can be predicted from negative correlation with past returns, and dividend yields or P/E ratios can explain as much as 40% of future return variance. Yet Malkiel notes these predictors failed after the mid-1980s: with S&P 500 P/E in the low 20s and dividend yield below 3% in June 1987, the next 10-year annual total return was 16.7%; after June 1992, with yield at 3% and P/E in the mid-twenties, the subsequent return through June 2002 was 11.4%; from December 1996, despite Campbell and Shiller’s near-zero forecast, the S&P 500 returned almost 7% annually through mid-2002.
- Anomalies are not dependable or profitable: small-company stocks returned over one percentage point more than large stocks since 1926, but there was no gain from holding smaller stocks from the mid-1980s through the 1990s; a Dimensional Fund Advisors value fund had an abnormal return of negative 0.2% per month over 1993–1998; momentum investors did worse than buy-and-hold investors because of transactions costs; and the January effect became undependable after publicity.
- Professional managers generally underperform: about three-quarters of actively managed funds failed to beat the S&P 500 and Wilshire indexes over the past decade; the median large-cap equity fund underperformed the S&P 500 by almost two percentage points over 10-, 15-, and 20-year periods; of 355 original funds over 30 years, only five outperformed the market by two percentage points per year or more; top funds of 1998–1999 did three times the index then three times worse in 2000–2001.
- Historical bubbles and crashes do not necessarily prove exploitable inefficiency: the October 1987 one-third drop coincided with long-term Treasury yields rising from about 9% to almost 10.5% and higher risk perceptions; a discount-rate rise from 11% to 13% would lower an index from $100 to $66.67. The Internet bubble offered no obvious arbitrage opportunity before it popped, and the Palm/3Com mispricing could not be shorted because too little Palm stock was outstanding. The historical equity risk premium—stocks about 10.5% versus high-grade bonds about 5.5% from 1926–2001—is partly attributed to survivorship bias and unexpected capital gains.
Methods
- Design: a survey/essay synthesizing theoretical and empirical literature on the efficient market hypothesis, behavioral finance, predictability, anomalies, and historical episodes; it is not a new primary empirical study or formal meta-analysis.
- Data/sample: cited studies and exhibits, including U.S. stock returns since 1926, S&P 500 dividend-yield and P/E deciles through 2000/2002, Fama–French size/value data for 1963–1990, mutual fund performance data through mid-2002, and examples such as the 1987 crash, the Internet bubble, and Palm/3Com.
- Analysis: narrative evaluation of statistical versus economic significance, robustness across sample periods, transaction costs, risk proxies, and limits to arbitrage; includes a simple present-value/discount-rate example for the 1987 crash.
Limitations
- The paper states it makes no attempt to present a complete survey; it acknowledges that markets can make egregious valuation errors (e.g., the Internet bubble), that psychological factors influence securities prices, and that behavioral influences cannot be ruled out.
- The paper notes survivorship bias in mutual fund datasets and data-mining/publication bias in the anomaly literature; predictable patterns may be time-dependent and can disappear after publication.
- Evident from the text: as an interpretive survey by an EMH proponent, it relies on selected cited findings and exhibits rather than new systematic tests, and its conclusions about non-exploitability depend on assumptions about transaction costs and risk adjustment.
Model-written summary. Check it against the paper before relying on it.
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Statistics
Verification
Claims the paper makes
72 Own interpretation · 52 Not checked yet · 30 No basis given · 9 Own result
In the paper
“Finally, it is worth noting that this phenomenon does not work consistently with individual stocks, as has been shown by Fluck, Malkiel and Quandt (1997). Investors who simply purchase a portfolio of individual stocks with the highest dividend yields in the market will not earn a particularly high rate of return.”
What the sources say
- Not checked yetcites Fluck, Malkiel and Quandt (1997)
plain- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“In fact, for all 10 year periods from 1985 through 1992 that ended June 30, 2002, realized annual equity returns from the market index have averaged approximately 15 percent.”
plain- Asserted: passes — The authors put it forward as true.
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A result the paper reports from its own data — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Investors have tended to earn larger long-horizon returns when purchasing the market basket of stocks at relatively low price-earnings multiples.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“Over a period running back to the 1930s, it does not appear that investors could actually have realized higher rates of return from mutual funds specializing in 'value' stocks.”
hedged- Asserted: passes — The authors put it forward as true.
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In the paper
“Moreover, the use of dividend yields to predict future returns has been ineffective since the mid-1980s.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“Such funds have generally underperformed the market averages during the 1995-99 period.”
plain- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“there was certainly no obvious arbitrage opportunity available.”
boosted- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“The apparent arbitrage in the Palm Pilot case (sell Palm Pilot short and buy 3-Com) could not be undertaken because not enough Palm stock was outstanding to make borrowing the stock possible to effectuate a short sale.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“Indeed, the January effect became undependable after it received considerable publicity.”
plaindirect- Asserted: passes — The authors put it forward as true.
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None of the sources cited for this claim have been checked yet.
In the paper
“Discounts have narrowed from historical averages for funds with assets traded in liquid markets”
plain- Asserted: passes — The authors put it forward as true.
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- It may state two separate claims as one. 31
- Probably not a substantial claim. 31
In the paper
“However, they also found that returns in the next period were similar for both groups, so they could not confirm that a contrarian approach would yield higher-thanaverage returns.”
What the sources say
- Not checked yetcites Fluck, Malkiel and Quandt (1997)
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In the paper
“There was a statistically strong pattern of return reversal, but not one that implied an inefficiency in the market that would enable investors to make excess returns.”
What the sources say
- Not checked yetcites Fluck, Malkiel and Quandt (1997)
plain- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“From the mid1980s through the decade of the 1990s, there has been no gain from holding smaller stocks. Indeed, in most world markets, larger capitalization stocks produced larger rates of return.”
plain- Asserted: passes — The authors put it forward as true.
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A result the paper reports from its own data — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“In general, the exhibit shows that investors have earned a higher rate of return from the stock market when they purchased a market basket of equities with an initial dividend yield that was relatively high, and relatively low future rates of return when stocks were purchased at low dividend yields.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“Professional pension-fund and mutual fund managers over-weighted their portfolios with high-tech stocks.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“We know now, with the benefit of hindsight, that outlandish and unsupportable claims that being made regarding the growth of the Internet (and the related telecommunications structure needed to support it).”
boosted- Asserted: passes — The authors put it forward as true.
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The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“But even here, when we know after the fact that major errors were made, there were certainly no arbitrage opportunities available to rational investors before the bubble popped.”
boosted- Asserted: passes — The authors put it forward as true.
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In the paper
“As Palm Pilot began trading, enthusiasm for the shares was so great that the 95 percent of its shares still owed by 3-Com had a market value considerably more than the entire market capitalization of 3-Com, implying that all the rest of its business had a negative value.”
plaindirectSingle case- Asserted: passes — The authors put it forward as true.
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In the paper
“Many of Wall Street's most respected security analysts, including those independent of investment banking firms, were recommending Internet stocks to the firm's institutional and individual clients as being fairly valued.”
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“The 'anomaly' disappeared once 3-Com spun off more of Palm stock.”
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“Initially, only 5 percent of the Palm Pilot shares were distributed to the public; the other 95 percent remained on 3-Com's balance sheet.”
plainSingle case- Asserted: passes — The authors put it forward as true.
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In the paper
“while stock prices eventually did adjust to levels that more reasonably reflected the likely present value of their cash flows”
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In the paper
“We know now that projections for the rates and duration of growth of these for 'new economy' companies were unsustainable.”
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In the paper
“While it is now clear in retrospect that such professionals were egregiously wrong, there was certainly no obvious arbitrage opportunity available.”
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In the paper
“But remember, it was the sharp-pencilled professional investors who argued that the valuations of high-tech companies were proper.”
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In the paper
“Undoubtedly, some market participants are demonstrably less then rational.”
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In the paper
“However, the finding of mean reversion is not uniform across studies and is quite a bit weaker in some periods than it is for other periods.”
plaincorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“Odean (1999) suggests that momentum investors do not realize excess returns. Quite the opposite - a sample of such investors suggests that such traders did far worse than buy-and-hold investors even during a period where there was clear statistical evidence of positive momentum.”
What the sources say
- Not checked yetcites Odean (1999)
hedged- Asserted: passes — The authors put it forward as true.
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In the paper
“The statistical dependencies giving rise to momentum are extremely small and are not likely to permit investors to realize excess returns.”
hedged- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“I conclude that our stock markets are more efficient and less predictable than many recent academic papers would have us believe.”
- Also stated in: § Burton G. Malkiel Abstract · p. 4 · boosted
“I conclude that our stock markets are far more efficient and far less predictable than some recent academic papers would have us believe.”
boosted- Asserted: passes — The authors put it forward as true.
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- Also stated in: § Burton G. Malkiel Abstract · p. 4 · boosted
In the paper
“He also shows that many of the return 'anomalies' arise only in the context of some very particular model, and that the results tend to disappear when exposed to different models for expected 'normal' returns, different methods to adjust for risk, and when different statistical approaches are used to measure them.”
What the sources say
- Not checked yetcites Eugene Fama (1998)
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In the paper
“Fama finds that apparent underreaction to information is about as common as overreaction, and post-event continuation of abnormal returns is as frequent as post-event reversals.”
What the sources say
- Not checked yetcites Eugene Fama (1998)
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“There also appear to be a number of day-of-the-week effects. For example, French (1980) documents significantly higher Monday returns.”
What the sources say
- Not checked yetcites French (1980)
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“A number of researchers have found that January has been a very unusual month for stock market returns. Returns from an equally weighted stock index have tended to be unusually high during the first two weeks of the year. The return premium has been particularly evident for stocks with relatively small total capitalizations (Keim, 1983).”
What the sources say
- Not checked yetcites Keim, 1983
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“Indeed, the U.S. stock market is almost unique in that it is one of the few world markets that remained in continuous operation during the entire period and the measured risk premium results, in part, from survivorship bias.”
plainconditional- Asserted: passes — The authors put it forward as true.
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In the paper
“There also appear to be some patterns in returns around the turn of the month (Lakonishok and Smidt, 1988), as well as around holidays (Ariel, 1990).”
What the sources say
- Not checked yetcites Lakonishok and Smidt, 1988
- Not checked yetcites Ariel, 1990
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In the paper
“Campbell and Shiller (1998) report that initial P/E ratios explained as much as 40 percent of the variance of future returns. They conclude that equity returns have been predictable in the past to a considerable extent.”
What the sources say
- Not checked yetcites Campbell and Shiller (1998)
plaincorrelational- Asserted: passes — The authors put it forward as true.
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In the paper
“Eugene Fama and Kenneth French (2002) argue that the high average realized returns result in part from large unexpected capital gains.”
What the sources say
- Not checked yetcites Fama and French (2002)
plaindirect- Asserted: passes — The authors put it forward as true.
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In the paper
“For example, using the Ibbotson data from 1926 through 2001, common stocks have produced rates of retain of approximately 10½ percent while high grade bonds have returned only about 5½ percent.”
What the sources say
- Not checked yetcites Ibbotson data
plain- Asserted: passes — The authors put it forward as true.
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In the paper
“For example, Fama and French (1993) suggest that the price-to-book value ratio may reflect another risk factor that is priced into the market and not captured by CAPM.”
What the sources say
- Not checked yetcites Fama and French (1993)
hedgedconditional- Asserted: passes — The authors put it forward as true.
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In the paper
“Fama and French suggest that size may be a far better proxy for risk than beta, and therefore that their findings should not be interpreted as indicating that markets are inefficient.”
What the sources say
- Not checked yetcites Fama and French
hedgedconditional- Asserted: passes — The authors put it forward as true.
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In the paper
“Moreover, if stocks are divided up by beta deciles, ten portfolios constructed by size display the same kind of positive relationship shown in Exhibit 2. On the other hand, within size deciles, the relationship between beta and return continues to be flat.”
What the sources say
- Not checked yetcites Fama and French
plaincorrelational- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But these findings do not necessarily imply inefficiency. They may simply indicate failure of the CAPM to capture all the dimensions of risk.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
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A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“And it is far from clear that any of these results can be used to generate profitable trading strategies.”
hedged- Asserted: passes — The authors put it forward as true.
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In the paper
“Moreover, these non-random effects (even if they were dependable) are very small relative to the transactions costs involved in trying to exploit them. They do not appear to offer arbitrage opportunities that would enable investors to make excess risk-adjusted returns.”
hedged- Asserted: passes — The authors put it forward as true.
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It may state two separate claims as one.
In the paper
“Fama and French (1993) argue that a three-factor asset-pricing model (including price-to-book-value and size as measures of risk) is the appropriate benchmark against which anomalies should be measured.”
What the sources say
- Not checked yetcites Fama and French (1993)
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim.
In the paper
“Fama and French (1992) concluded that size and price-to-book-value together provide considerable explanatory power for future returns and once they are accounted for, little additional influence can be attributed to P/E multiples.”
What the sources say
- Not checked yetcites Fama and French (1992)
plaincorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: unclear — It is unclear whether the paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“I believe that this finding is simply the result of a combination of perceived equity risk being considerably higher during the early years of the period and of average equity returns being much higher than had been forecast by investors.”
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
In the paper
“researchers such as Ross (2001) have suggested that they can largely be explained by fund management fees.”
What the sources say
- Not checked yetcites Ross (2001)
hedgeddirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Datamining problems are unique to nonexperimental sciences, such as economics, which rely on statistical analysis for their insights and cannot test hypotheses by running repeated controlled experiments.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“some of the patterns based on fundamental valuation measures of individual stocks may simply reflect better proxies for measuring risk.”
hedgedconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it. The paper may give no reason why it holds.
The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“Equity valuations rest on uncertain future forecasts.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Surely, if market prices were determined by irrational investors and systematically deviated from rational estimates of the present value of corporations, and if it was easy to spot predictable patterns in security returns or anomalous security prices, then professional fund managers should be able to beat the market.”
plainconditional- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds. It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Surely, the remarkable market values assigned to internet and related high-tech companies seem inconsistent with rational valuation.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Moreover, the potential profits from name or ticker symbol confusion are extremely small relative to the transactions costs that would be required to exploit them.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Significant effects are likely to be published in professional journals while negative results, or boring confirmations of previous findings, are relegated to the file drawer or discarded.”
hedgedcorrelational- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: unclear — It is unclear why the paper says it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Certainly, the extent of the bubble was only clear in retrospect.”
boosted- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper’s conclusions may not depend on it.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Fortunately, 'bubble' periods are the exception rather than the rule”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
In the paper
“Economists such as Shiller have suggested that during the early 2000s, the ex ante equity risk premium was, if anything, irrationally too low.”
What the sources say
- Not checked yetcites Shiller
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: fails — The paper’s conclusions may not depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. The paper’s conclusions may not depend on it.
The paper states this without a source or data behind it here, so there is nothing to check it against. The quote shows it is in the paper.
In the paper
“many 'anomalies' and statistically significant predictable patterns in the stock returns have been uncovered in the literature.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“these patterns are not robust and dependable in different sample periods”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Undoubtedly, with the passage of time and with the increasing sophistication of our databases and empirical techniques, we will document further apparent departures from efficiency and further patterns in the development of stock returns.”
boosteddirect- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Moreover, whatever patterns or irrationalities in the pricing of individual stocks that have been discovered in a search of historical experience are unlikely to persist and will not provide investors with a method to obtain extraordinary returns.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: unclear — It is unclear why the paper says it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“The record of professionals does not suggest that sufficient predictability exists in the stock market or that there are recognizable and exploitable irrationalities sufficient to produce excess returns.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
In the paper
“Moreover, the market cannot be perfectly efficient or there would be no incentive for professionals to uncover the information that gets so quickly reflected in market prices, a point stressed by Grossman and Stiglitz (1980).”
What the sources say
- Not checked yetcites Grossman and Stiglitz (1980)
plaindirect- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“But I suspect that the end result will not be an abandonment of the belief of many in the profession that the stock market is remarkably efficient in its utilization of information.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: fails — It may be too vague to check against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim. It may be too vague to check against evidence.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“If any $100 bills are lying around the stock exchanges of the world, they will not be there for long.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
Probably not a substantial claim.
In the paper
“He found that active mutual fund managers were unable to add value and, in fact, tended to underperform the market by approximately the amount of their added expenses.”
What the sources say
- Not checked yetcites Jensen (1969)
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“Periods such as 1999 where 'bubbles' seem to have existed, at least in certain sectors of the market, are fortunately the exception rather than the rule.”
hedged- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: fails — The paper may give no reason why it holds.
Probably not a substantial claim. The paper may give no reason why it holds.
A conclusion the paper draws from its own results — it cites no other source for it, so there is none to check. The quote shows it is in the paper.
In the paper
“As a result, pricing irregularities and predictable patterns in stock returns can appear over time and even persist for short periods.”
plain- Asserted: passes — The authors put it forward as true.
- Checkable: passes — It can be checked against evidence.
- Load-bearing: passes — The paper’s conclusions depend on it.
- Based: passes — The paper gives a reason why it holds.
It may state two separate claims as one.
The paper relies on this without support.
Interest rates tend to be mean reverting.
“the tendency of interest rates to be mean reverting”
The paper relies on this without support.
Yields on long-term Treasury bonds increased from about 9 percent to almost 10 ½ percent in the two months prior to mid-October 1987.
“yields on long-term Treasury bonds increased from about 9 percent to almost 10 ½ percent in the two months prior to mid-October.”
The paper relies on this without support.
Congress threatened to impose a 'merger tax' that would have made merger activity prohibitively expensive and could well have ended the merger boom.
“Early in the month, Congress threatened to impose a 'merger tax' that would have made merger activity prohibitively expensive and could well have ended the merger boom.”
The paper relies on this without support.
James Baker threatened to encourage a further fall in the exchange value of the dollar, increasing risks for foreign investors and frightening domestic investors.
“Also, in early October 1987, then Secretary of the Treasury James Baker had threatened to encourage a further fall in the exchange value of the dollar, increasing risks for foreign investors and frightening domestic investors as well.”
The authors state this as an assumption.
Stocks are priced as the present value of the expected future stream of dividends.
“Suppose stocks are priced as the present value of the expected future stream of dividends.”
The paper relies on this without support.
Professional fund managers are compensated with strong incentives to outperform the market.
“who often are compensated with strong incentives to outperform the market”
Claims other papers make about this one
Each is checked against this paper’s own text: does it say what the citing paper says it does?
The cited source says what the claim attributes to it.
In the citing paper
“In addition, the ability to predict certain market prices does not imply that these can be exploited to earn excess profit (Malkiel, 2003).”
From Bridging the divide in financial market forecasting: machine learners vs. financial economists (2016) · cites this paper as Malkiel, 2003
The cited source says what the claim attributes to it.
In the citing paper
“More specifically, the efficient market hypothesis (EMH) suggests that current stock prices discount available information and that it is not possible to obtain systematic returns by exploiting any predictability of prices (Malkiel, 2003).”
From Bridging the divide in financial market forecasting: machine learners vs. financial economists (2016) · cites this paper as Malkiel, 2003
The cited source says what the claim attributes to it.
In the citing paper
“(which might well make our results consistent with the implications of the EMH (Malkiel, 2003)).”
From Bridging the divide in financial market forecasting: machine learners vs. financial economists (2016) · cites this paper as Malkiel, 2003
Self-check
Percentages, sums and reported differences re-computed from the paper’s own numbers.
Each contradiction between two passages listed here was confirmed by an independent check.
Rated minor: it would not touch a result — a value no result rests on, a p-value that stays on the same side of the significance level, or a conflict that is clerical, resolved elsewhere in the paper, or outside its own findings.
In the paper
§ The Performance of Professional Investors · p. 31
“The first study of mutual fund performance was undertaken by Jensen (1969).”
§ References · p. 36
“Jensen, Michael (1968), 'The Performance of Mutual Funds in the Period 1945-64,' Journal of Finance , vol. 23, 389-416.”
Rated minor: it would not touch a result — a value no result rests on, a p-value that stays on the same side of the significance level, or a conflict that is clerical, resolved elsewhere in the paper, or outside its own findings.
In the paper
§ The Performance of Professional Investors · p. 33
“Exhibit 9 shows the distribution of returns over a 30-year period. Of the original 355 funds, only five of them outperformed the market by two percentage points per year or more.”
§ Mutual Funds, 1937-June 2002 · p. 47
“Exhibit 9 How the Top 20 Equity Funds of the 1980s Performed during the 1990s”
Citations
Cites
Prospect Theory: An Analysis of Decision under Risk
Kahneman, D., & Tversky, A. (1979) · Econometrica · doi:10.2307/1914185 · Cited by 48,524
Prospect theory: An analysis of decision under risk
Kahneman, D. J., & Tversky, A. (1988) · Cambridge University Press eBooks · doi:10.1017/cbo9780511609220.014 · Cited by 32,720
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*
Malkiel, B. G., & Fama, E. F. (1970) · The Journal of Finance · doi:10.1111/j.1540-6261.1970.tb00518.x · Cited by 24,478
Self-citationThe Cross‐Section of Expected Stock Returns
FAMA, E. F., & FRENCH, K. R. (1992) · The Journal of Finance · doi:10.1111/j.1540-6261.1992.tb04398.x · Cited by 17,261
The Cross-Section of Expected Stock Returns
Fama, E. F., & French, K. R. (1992) · The Journal of Finance · doi:10.2307/2329112 · Cited by 17,259
Efficient capital markets: A review of theory and empirical work
Fama, E. F. (1970) · The Journal of Finance · doi:10.2307/2325486 · Cited by 13,635
Does the Stock Market Overreact?
De BONDT, W. F. M., & THALER, R. (1985) · The Journal of Finance · doi:10.1111/j.1540-6261.1985.tb05004.x · Cited by 7,578
On the psychology of prediction.
Kahneman, D., & Tversky, A. (1973) · Psychological Review · doi:10.1037/h0034747 · Cited by 6,202
The Econometrics of Financial Markets
Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (2012) · Princeton University Press eBooks · doi:10.2307/j.ctt7skm5 · Cited by 6,105
Research works printed but not linked: 4
- Fama Eugene, 1993, Journal of Finance., 33, 3
- 1980, American Economic Review., 70, 393
- Malkiel Burton G, 2000, Wall Street Journal
- Samuelson Paul, 1965, Industrial Management Review, 6, 41
Cited by
Sorted by citations
Twitter mood predicts the stock market
Bollen, J., Mao, H., & Zeng, X. (2011) · Journal of Computational Science · doi:10.1016/j.jocs.2010.12.007 · Cited by 5,206
Measuring Organizational Performance: Towards Methodological Best Practice
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009) · Journal of Management · doi:10.1177/0149206308330560 · Cited by 2,668
A review of unsupervised feature learning and deep learning for time-series modeling
Längkvist, M., Karlsson, L., & Loutfi, A. (2014) · Pattern Recognition Letters · doi:10.1016/j.patrec.2014.01.008 · Cited by 1,276
Asymmetric causality tests with an application
Hatemi‐J, A. (2011) · Empirical Economics · doi:10.1007/s00181-011-0484-x · Cited by 891
Applications of deep learning in stock market prediction: Recent progress
Jiang, W. (2021) · Expert Systems with Applications · doi:10.1016/j.eswa.2021.115537 · Cited by 809
Metadata
- Authors
- Malkiel, B. G.
- Affiliations
- Princeton University (US)
- Corresponding author
- Malkiel, Burton G
- ORCID
- Malkiel, Burton G
- Venue
- Journal of Economic Perspectives
- Publisher
- American Economic Association
- Published
- 2003-02-01
- Volume
- 17
- Issue
- 1
- Pages
- 59-82
- ISSN
- 0895-3309 (ISSN-L)
- OpenAlex
- W2138293190
- Cited by
- 2,161
- References
- 69
- Citations by year
- 2026: 82 · 2025: 154 · 2024: 105 · 2023: 143 · 2022: 125 · 2021: 142 · 2020: 132 · 2019: 108 · 2018: 112 · 2017: 111 · 2016: 89 · 2015: 151 · 2014: 120 · 2013: 113 · 2012: 115
- FWCI
- 40.69
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Journal of Economic Perspectives (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
- Social Sciences › Decision Sciences › Management Science and Operations Research › Stock Market Forecasting Methods
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
- Keywords
- efficient market hypothesis, stock price predictability, behavioral finance, market efficiency, stock returns
About these checks
Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
A language model drew the claims from the paper on 2026-10-10, under version 3 of the claim definition (model deepseek-v4.1-flash, prompt extract-v3).
A second model labelled each claim on 2026-10-10 (model jev-1.13-20260917, definition revision gold-guideline-v0.2).
Statistics and arithmetic are recomputed, not judged.
Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.
What counts as a claim ›How we measure confidence ›How we check this ›
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