Are markets efficient?

chicagobooth.edu/review | Do market prices generally reflect all available information? Or are they prone to bubbles? On this episode of The Big Question, two members of the Chicago Booth faculty—Nobel laureates Eugene F. Fama and Richard H. Thaler—discuss how markets behave (and misbehave). Along the way they discuss value stocks versus growth stocks, the existence of economic bubbles, and the curious case of the CUBA Fund. 0:00 Intro 1:02 What is the efficient market hypothesis? 1:25 Can investors beat the market? 3:30 Are prices always correct? 5:15 The 1987 stock market crash as a test of market efficiency 9:13 Do bubbles exist? The housing market example 12:01 The CUBA fund: a textbook mispricing case 15:04 Where Fama and Thaler still disagree FAQ: Q: What is the efficient market hypothesis? A: It's the idea that asset prices fully reflect all publicly available information, making it very difficult to consistently beat the market. Q: Do Fama and Thaler agree that markets can be beaten? A: Yes — they agree few investors reliably beat the market after costs. They disagree on whether prices are always "correct."