Can we truly study efficient markets?
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Studying efficient markets retrospectively poses significant challenges due to the limitations in historical data. As and discussed, earlier periods lacked comprehensive and frequent financial data, such as bid-ask spreads and exact trade execution prices. These data points are crucial for validating the efficient market hypothesis. Modern data is far more detailed and frequent, enabling more accurate tests and models for market efficiency 1.
Additionally, historical contexts, like geopolitical turmoil and weaker international supply chains, add layers of complexity to understanding market efficiency over long periods. The methods and tools available today simply weren't available or as effective in the past, making it difficult to draw direct comparisons or conclusions 1.
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