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The Mostly Efficient Market Hypothesis, Part 2

By David Edwards

 About this article:
 Yesterday I discussed my take on the different forms of the efficient market hypothesis (EMH) and how I use that information to make trades. Today I'll give you three examples of specific market inefficiencies I've observed that I try to take advantage of. The Weekend Effect On most Fridays I see the U.S. equity markets sag from 1 p.m. until the close, regardless of price movements earlier in the day or week. Why would this happen? Market makers and daytraders don't like carrying positions over the weekend, and because these participants are net long during the week, they sell off their positions into the close. So if I have new funds to invest on a Friday, I'll typically wait until Monday to make the trades. Net of transaction costs, I could not short stocks on Friday and make money covering on Monday, but at least I can...

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