Cross-posting from my personal blog, but written primarily for Less Wrong after recent discussion here.

There are whispers that the Efficient-Market Hypothesis is dead. Eliezer's faith has been shaken. Scott says EMH may have been the real victim of the coronavirus.

The EMH states that “asset prices reflect all available information”. The direct implication is that if you don’t have any non-available information, you shouldn’t expect to be able to beat the market, except by chance.

But some people were able to preempt the corona crash, without any special knowledge! Jacob mentioned selling some of his stocks before the market reacted. Wei Dai bought out-of-the-money 'put' options, and took a very handsome profit. Others shorted the market.

These people were reading the same news and reports as everyone else. They profited on the basis of public information that should have been priced in.

And so, the EMH is dead, or dying, or at the very least, has a very nasty-sounding cough.

I think that rumours of the death of efficient markets have been greatly exaggerated. It seems to me the EMH is very much alive-and-kicking, and the recent discussion often involves common misunderstandings that it might be helpful to iron out.

This necessarily involves pissing on people's parade, which is not much fun. So it's important to say upfront that although I don't know Wei Dai, he is no doubt a brilliant guy, that Jacob is my favourite blogger in the diaspora, that I would give my left testicle to have Scott's writing talent and ridiculous work ethic, that Eliezer is a legend whose work I have personally benefited from greatly, etc.

But in the spirit of the whole rationality thing, I want to gently challenge what looks more like a case of 'back-slaps for the boys' than a death knell for efficient markets.

First: how the heck did the market get the coronavirus so wrong?

The Great Coronavirus Trade

Lots of people initially underreacted to COVID-19. We are only human. But the stockmarket is not only human—it’s meant to be better than this.

Here’s Scott, in A Failure, But Not of Prediction:

The stock market is a giant coordinated attempt to predict the economy, and it reached an all-time high on February 12, suggesting that analysts expected the economy to do great

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