Use EMH as a humility test, not a religion
Use the Efficient Market Hypothesis to test whether an active position has a defensible edge.
The move: require an edge statement before active risk. EMH is useful because it disciplines confidence. It asks whether your insight is truly differentiated, whether the market can already see it, and whether the expected payoff remains after costs and risk adjustment. A portfolio manager who cannot answer those questions may still be lucky, but luck is not a process. Use four edge categories. Information edge means you have better data or analysis. Behavioral edge means other investors are forced or frightened sellers. Structural edge means constraints keep some investors out. Time-horizon edge means you can wait longer than the…
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