John Mauldin has published an excellent article on the flaws of the Efficient Market Theory. Mauldin also mentions the study done by Grantham, Mayo and Otterloo:
"The first stock exchange was founded in 1602. The first equity bubble occurred just 118 years later - the South Sea bubble. Since then we have encountered bubbles with an alarming regularity. My friends at GMO define a bubble as a (real) price movement that is at least two standard deviations from trend. Now a two standard deviation event should occur roughly every 44 years. Yet since 1925, GMO have found a staggering 30 plus bubbles. That is equivalent to slightly more than one every three years!"
2SD Comment: Fertile ground for profit!
Source:
http://www.frontlinethoughts.com/gateway.asp
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