Reining in market irrationality

The consequence of all this is what we see, which is that stock prices can go haywire

In venturing suggestions on so broad a scale, an individual … can be more radical — in the etymological sense of going to the roots of the matter — more consistent, and more venturesome

Milton Friedman (1959)

Prices fluctuate massively in the stock market. All the changes in prices are not due to changes in fundamentals that underlie the prices of stocks. Some are due to sentiment or irrationality. This is now well accepted. The earlier work on efficient market theory (EMT) had only shown that the financial markets are competitive enough so that there is consistently no free lunch