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A 1969 study titled, “The Adjustment of Stock Prices to New Information,”69 was conducted by Eugene F. Fama, Lawrence Fisher, Michael Jensen, and Professor Richard Roll at the University of California, Los Angeles. The study concluded it takes five to sixty minutes for market prices to completely reflect new information — and that was in 1969. Fund managers try to exploit whatever slight gain might be had by reacting quickly to a news story, but the likelihood of them consistently being on the right side of a trade in reaction to the news is extremely low.

Solutions Going or Gone? When discussing the direction of the market, it’s important to use the past-tense verb. During times of high market volatility, people commonly make the mistake of saying, “The market is going down (or up).” Although it appears harmless, this statement implies that the direction of market prices is knowable. People making this statement often use it as the impetus for making investment decisions. Such decisions usually do not fare well, because they are based on the fallacy that one can predict the direction of future price movements. Investors can avoid this pitfall by understanding Eugene Fama’s finding that security prices move in a random walk. At any point in time, we only know the current and past price of any given security. Where the price will be even a second later is unknown. The market continuously sets prices in response to

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