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pcm comments on Open thread, Aug. 10 - Aug. 16, 2015 - Less Wrong Discussion
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If the Efficient Market Hypothesis is true, shouldn't it be almost as hard to lose money on the market as it is to gain money? Let's say you had a strategy S that reliably loses money. Shouldn't you be able to define an inverse strategy S', that buys when S sells and sells when S buys, that reliably earns money? For the sake of argument rule out obvious errors like offering to buy a stock for $1 more than its current price.
Yes, for strategies with low enough transaction costs (i.e. for most buy-and-hold like strategies, but not day-trading).
It will be somewhat hard for ordinary investors to implement the inverse strategies, since brokers that cater to them restrict which stocks they can sell short (professional investors usually don't face this problem).
The EMH is only a loose approximation to reality, so it's not hard to find strategies that underperform on average by something like 5% per year.