The Stock Market Might Be Right, Sort Of

The idea that prices in financial markets reflect all available information — also known as the efficient markets hypothesis — has many variations: Some adherents think the process is immediate and precise, while others think it’s much messier, with prices often missing true value by a significant margin.

New research suggests that the latter version fits the data better — and that the financial mathematician Fischer Black, who posited that prices tend to be off by no more than a factor of two or so, might have been just about right.