“Some economists, when thinking about long memory, are concerned that it undercuts the Efficient Market Hypothesis that prices fully reflect all relevant information; that the random walk is the best metaphor to describe such markets; and that you cannot beat such an unpredictable market. Well, the Efficient Market Hypothesis is no more than that, a hypothesis. Many a grand theory has died under the onslaught of real data.” Benoît B. Mandelbrot
They say one picture is worth a thousand words (and a big thanks to TheContraryInvestor for the chart. His weekly reports are invaluable.)
Here is why the slumping airlines do not affect the Dow Transports Index significantly.
We do not understand the rationale, but we were quite surprised to see how little they contribute to it.
