A FACTOR OF TWO—OR OF THREE?

A FACTOR OF TWO—OR OF THREE? Select any stock and look at its price movements for a day–or a month–or a year. What is the correct price for that stock? Richard Thaler cites Fischer Black, who “once defined a market as efficient if its prices were ‘within a factor of 2 of value’ and… opined that by this (rather loose) definition ‘almost all markets are efficient almost all the time.’” Thaler suggests that if Black were alive today, he might amend his standard to a factor of three.