Bleg: Fama/French on Market Size and Efficiency

August 7th, 2013

Gentle Readers: I remember learning many decades ago that Fama and French’s seminal research had demonstrated that very few trades and very few traders are necessary for a market to achieve “efficiency.” (Either strong form — “the price is right” — or weak form — “individual traders can’t tell if the ‘the price is right,’ so can’t beat the market.”)

But I’ve searched multiple times, and have been unable to find this research. Can anyone give me pointers?

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  1. Oilfield Trash
    August 7th, 2013 at 15:35 | #1
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    I think the paper you want is linked below.

    stevereads.com/papers_to…/the_behavior_of_stock_market_prices.pdf‎

  2. Asymptosis
    August 7th, 2013 at 18:30 | #2
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    @Oilfield Trash

    Thanks, I have looked at that paper, and the only discussion of this issue that I can find is here:

    How many superior analysts are necessary to insure independence? … It is impossible to give a firm answer to the first question, since the effectiveness of the superior analysts probably depends more on the extent of their resources than on their number. Perhaps a single, well-informed and well-endowed specialist in each security is sufficient.

    Not terribly useful. Perhaps real evidence is embedded in the maths below, but skimming through I really don’t think so. And the fact that Fama throws up his hands here suggests that he doesn’t have an empirically-informed view on the matter…

  3. JKH
    August 8th, 2013 at 06:19 | #3
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    – I remember learning many decades ago that Fama and French’s seminal research had demonstrated that very few trades and very few traders are necessary for a market to achieve “efficiency.” –

    For what its worth, I don’t recall that part at all. But its been a long time.

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