The Less-Efficient Market Hypothesis

The discussion is an excerpt from a paper titled "The Less-Efficient Market Hypothesis" written by Clifford Asness, a managing principal at AQR Capital Management. Asness argues that the stock market has become less efficient in recent decades, particularly in terms of the relative pricing of stocks. He suggests that factors like the rise of indexing, low interest rates, and technology, especially social media, have contributed to this decline in efficiency. Asness further explores the implications of this trend for value investors, noting that while value investing is likely to become more lucrative in a less efficient market, it will also become more difficult to sustain, given the increased volatility and duration of underperformance periods. He concludes by offering suggestions for investors to navigate these challenges, including a longer-term perspective, a focus on portfolio-level performance over individual line items, and a willingness to embrace greater volatility in diversifying investments.

The research paper can be found here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4942046

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