Re: Mahathir's Phobia of Speculators

From: John Conover <>
Subject: Re: Mahathir's Phobia of Speculators
Date: 20 Apr 1999 18:58:54 -0000

Burkhard C. Schipper writes:
> Why do you always take investors as so rational beings? They cognitive
> bounded as all other human beings.

Oh, Burkhard, that's the point. Since rational investors are presumed
to base their decisions on information, (do diligence, etc.,) and this
leads to a logical contradiction, investors do not only behave
irrationally, it is impossible for them to do otherwise, implying that
a rational investor is an oxymoron. (At least in the sense of the

I suppose that, (at least as far as the EMH is concerned,) this says
that efficient markets are an oxymoron, too. Which would imply that
equity pricing can not exhibit fractional Browning motion
characteristcs-which is a requirement, if the market is efficient,
(and fair.)

Meaning that kurtosis in equity price characteristics would be the
expected norm, (ie., the variance is not defined, or infinite, and
volatility does not equal risk, and price does not equal value.)

Now, we understand how the Internet stocks work.


BTW, the concepts of Capital Asset Pricing Model, (CAPM,) depends on
paradigm of efficient markets and rational investors, too. So, it,
also, is based on a logical contradiction.


John Conover,,

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