Early Evidence on Us Stock Market Efficiency : ‘Market vs. State’ Debate and Deregulation Implications

Evidence shows that the economic assumption of efficient “free markets”—which underpins the “market versus state” debate—is questionable. Market efficiency is a significant foundation theory for neoliberal economists. Prove it wrong, and the neoliberals’ philosophy of market based theories and globalization become doubtful. For the first time, late 19th century to early 20th century US stock market data are examined—prior to the US federal government instituting securities regulations. The relative maxima and minima stock trading rule methodology—used on S&P 500 Index portfolio B—makes +177% more money than buy-and-hold S&P 500 Index portfolio A—and is only 60% as risky. This calls into question the weak form of the efficient market theory. The deregulated US stock market is inefficient during this early period. Therefore, government deregulation may hinder rather than help solve the ongoing worldwide 2008 credit crisis