Over the past 50 years, empirical and academic evidence has shown that while the Efficient Market Hypothesis (EMH) has substantial merit, it also has significant deficiencies. In particular, the EMH assumes investors behave rationally at all times. A competing theory, Behavioral Finance (BF), generates an awareness aligned with measuring the effects of social, cognitive, and emotional factors related to investment decisions.
Markets are efficient most of the time, but because investors do not behave rationally all the time, BF can explain the consequences of market prices, returns, and resource allocation some of the time. The awareness of these opposing theories on asset pricing has earned a Nobel Prize, but today many professional money managers base their strategies decisions on the EMH.
Given the evidence supporting both theories, we believe both should be the cornerstones of any investment strategy. While financial markets oscillate between phases of efficiency and inefficiency, we have skillfully developed sophisticated proprietary models that are designed to exploit regime changes.