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The "Efficient Restaurant Hypothesis": a mental model for finance (and food) — Basil Halperin

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I. The efficient market hypothesis says that you can't pick out which stocks are undervalued versus which are overvalued. Likewise, I claim that you can't pick out which restaurants are underpriced versus which restaurants are overpriced. Think you've found a great company, so that their stock will outperform on a risk-adjusted basis? Nope, someone else has already incorporated that information into the stock price and pushed the price up. Think you've found a great restaurant which offers meals at a decent price? Nope, they've already raised their prices to the point where the extra cost just equals the extra utility you get from their extra delicious cuisine. II. A. But, first of all, we need to emphasize that this is on a risk-adjusted basis. A portfolio of stocks might have higher expected returns – but only if it's riskier. This applies to restaurants as well to stocks – trying a new exotic cuisine could be eye-opening and awesome, or awful. Admittedly, this is quantitatively much

The "Efficient Restaurant Hypothesis": a mental model for finance (and food) — Basil Halperin --> --> Home Research CV: pdf / html Essays Best essays RSS / email subscription Data Email: basilh@virginia.edu Twitter: @basilhalperin Basil Halperin --> Home Research CV: pdf / html Essays Best essays RSS / email subscription Data Email: basilh@virginia.edu Twitter: @basilhalperin Essays — Basil Halperin Essays The "Efficient Restaurant Hypothesis": a mental model for finance (and food) June 5, 2018 Confidence level (?) : High I. The efficient market hypothesis says that you can't pick

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