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Readers reviews of The Inefficient Stock Market

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This is a complex book heavy with maths. Unusually for books in this field, it is very polemical and this does make for an irritating style. It has a good summary of changes in modern financial market theory. The core of the discussion is the way that the theoretical efficient frontier is distorted by real market activity. We still tend to accept that the risk premium rises proportionally with the beta of the stock, or portfolio. The fund managers who follow this see risk as the chance of under performing the selected index. The book is dedicated to showing how the CAPM and Modern Finance models are flawed in their most basic assumptions. Because the market is less efficient than theory would acknowledge he suggests that an Expected Return Factor Model is a better way to understand and manage risk. The book provides food for thought, but many traders have already intuitively reached similar conclusions because their success is theoretically impossible in an efficient market.



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