Despite advances in technology, the markets remain inefficient as ever and are prone to periods of o...
Despite advances in technology, the markets remain inefficient as ever and are prone to periods of overreaction and irrationality, Agustin Sevilla, chief investment officer at Axa Rosenberg Investment Management, has claimed.
He said: "As market participants become more sophisticated and information is propagated faster, you would think there would be increased efficiency in the market, making it difficult for active managers looking to outperform. However, the evidence indicates otherwise."
He noted well-known strategies that remained popular included earnings/price, where stocks are sold short with low earnings to price ratios or bought with high earnings to price ratios; and price momentum/relative strength, which sold or bought stocks under or outperforming.
Sevilla explained: "It is important to understand that along with these strategies an investor is taking on more risk. If you look at earnings to price, a company might be very cheap, but no doubt there is significant risk associated with it."
Markets remain inefficient despite advances in technology
Earnings/price and price moment/relative strength strategies remain popular
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