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Lumifer comments on Stupid Questions September 2015 - Less Wrong Discussion

4 Post author: polymathwannabe 02 September 2015 06:26PM

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Comment author: AspiringRationalist 05 September 2015 09:24:26PM 2 points [-]

Another interesting thing here is that the currency markets do not fall under EMH, both empirically (they are clearly not a random walk) and theoretically (the preconditions for EMH do not hold).

Can you please elaborate on that? Do you mean the prices themselves are not a random walk or do you mean the prices are not a random walk after adjusting for interest rate differences?

And what preconditions don't hold for currency markets?

Comment author: Lumifer 08 September 2015 12:49:57AM 3 points [-]

The currency rates are not a random walk (it's easy to verify that emprirically) either before or after adjusting for the interest rate parity.

What makes currency markets different is that they have huge powerful players -- central banks -- which are not driven by the profit motive.

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