Note: This is post #94 in a weekly video series on basic economics.
When even professional stock pickers are not able to consistently beat the market, you probably shouldn’t invest your life savings on the the hot stock tip from your brother-in-law. Why is it, though, that no one seems to be able to outperform the crowd?
The reason, as economist Tyler Cowen explains, is information. In this video by Marginal Revolution University, Cowen explains the efficient market hypothesis, the idea that prices of traded assets already reflect all publicly available information.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.