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Comment by javert | Hacker News Reader

That paper is probably using a bogus definition of "efficient" (albeit probably one commonly accepted by economists---those people can be very slippery).

It defines "efficient" as: "current prices fully reflect all information available in past prices."

Well, all information available in past prices, is not all information available. So, even hypothetically, this is not true "efficiency."

Of course, asking for "efficiency" to be that _kind_ of thing is wrong, anyhow. When I invest in bitcoin months ago, all the information available to me was available to everyone else.

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Using the word "efficiency" anywhere close to the word "market" and not using an economic definition is bogus. You may as well make the rest up too. Those words have a very well defined and useful meaning (theoretically and practically) to most who interact with or study the markets.

And it's highly misleading for economists to use those words to mean something other than the English definition of those words.

To some degree, that is intentional, and we have a word for that: dishonesy.

English words also have established meanings.

There is a basic rule in language, which is don't overload words in a confusing way. Breaking this rule is never excusable.

If we were on an economics board, I would not complain about this, but well, we're not.

But we are discussing an economics paper and its use of the phrase!

1) We are discussion an economics paper as another reply notes. Of course we are going to use the economics definition of efficiency. We can hardly use anything else, can we? It has NOTHING to do with dishonesty.

2) Jargon. Don't tell me that software development doesn't have weird uses and definitions of words. Meanings of words changes over time, languages aren't static. The term efficiency in the context of economics is rather well established and part of the English language, despite what you may personally think about it.

English words also have established meanings.

They have no such thing. Grab a decent dictionary and start looking up random words. Many have at least 2 or 3 different definitions, often unrelated and sometimes even contradictory.

Are mathematicians dishonest as well when they use phrases like "almost everywhere" or computer scientist when they describe a problem as "Hard" or ballet dancers talk about an "adagio"? All those words have very specific generally understood meanings in the field which might confuse someone with no background in the field.

What alternative to you propose? That they make up new words each time they want a short hand to describe a specific concept, or that they use always a long descriptive phrase each time they want to talk about these concepts?

> an economic definition

My favourite comes from Fischer Black:

However, we might define an efficient market as one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value. The factor of 2 is arbitrary, of course. Intuitively, though, it seems reasonable to me, in the light of sources of uncertainty about value and the strength of the forces tending to cause price to return to value. By this definition,I think almost all markets are efficient almost all of the time. ‘Almost all’ means at least 90%.

Gotta love that optimism.

Actually, the paper is using a very well known, studied, and used definition of efficiency - weak form efficiency.

This is what current economists use when they talk about markets being efficient, so it makes sense for the paper to use it as well.

There are alternative definitions (strong, semi-strong), both of which have been shown to be mathematically false already (long before economists stopped believing them, sadly)

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