Saturday , October 24 2020
Home / Tim Worstall /No, don’t close the stock markets, really, don’t

No, don’t close the stock markets, really, don’t

Summary:
There’s a bit of chatter floating around that possibly the stock markets will be closed over the coronavirus problems. No, don’t do this, really, don’t do it.It’s entirely true that said markets are bouncing all over the place. But that’s because no one actually knows what is going to happen. We’re facing that uncertainty, not risk. What needs to be remembered is the efficient markets hypothesis. Which doesn’t say that markets are the efficient manner of doing everything. It doesn’t even say that markets are the efficient method of allocating capital - although they largely are. Instead it says only that markets are efficient at processing information.So, we face uncertainty. And at some point that uncertainty will collapse down into actual knowledge. Either because the thing(s) will have

Topics:
Tim Worstall considers the following as important:

This could be interesting, too:

Tyler Durden writes US Signs Commitment With Israel To Uphold Military Edge Over Gulf States

Tyler Durden writes ​​​​​​​WeWork Default Looms As COVID DOwnturn Sparks Fitch Downgrade

Tyler Durden writes To ‘Save’ People From COVID, Puerto Rico Shuts Down 911 Call-Centers

Tyler Durden writes Kremlin Says US Elections Have Become “Competition In Russophobia”

There’s a bit of chatter floating around that possibly the stock markets will be closed over the coronavirus problems. No, don’t do this, really, don’t do it.

It’s entirely true that said markets are bouncing all over the place. But that’s because no one actually knows what is going to happen. We’re facing that uncertainty, not risk.

What needs to be remembered is the efficient markets hypothesis. Which doesn’t say that markets are the efficient manner of doing everything. It doesn’t even say that markets are the efficient method of allocating capital - although they largely are. Instead it says only that markets are efficient at processing information.

So, we face uncertainty. And at some point that uncertainty will collapse down into actual knowledge. Either because the thing(s) will have happened or because the knowledge in general of what will becomes available. We would like that knowledge, as it becomes available - that is, as information about infection rates, communicability, death rates and all that - to be processed. We’d even like to know, as best we can, what is the collective and aggregate opinion on what people and governments are trying to do about the current problems.

Markets are that information processing system. Closing them down just when we so desperately desire to use them for this process would be the utmost perversity.

Or, as we might put it, we can certainly dislike the messages brought to us by market prices, even rail against them, but they are reality as best we can work out what that is. Reality being rather what we’re supposed to take note of, the more extreme our situation the more this is so.

Media enquiries: 07584 778207 (Call only, 24 hour)

Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

Leave a Reply

Your email address will not be published. Required fields are marked *