Study the excerpt of an article on the efficient market hypothesis below and answer the following questions. It has been 58 years since the publication of Eugene Fama's paper "Random Walks in Stock Market Prices" (Fama 1965). The profound impact of his work is still being felt today. Up to that publication, making money on Wall Street had been considered easy. Yes, investment management involved some measure of skill, but the necessary skill was minimal and easy to acquire. The efficient market hypothesis (EMH) that developed from Fama's work (Fama 1970) for the first time challenged that presumption. Fama's results reported in 1965 were entirely empirical in nature, but the coincident work by Samuelson (1965) provided a strong theoretical basis for this hypothesis. The term "efficient market hypothesis" means many things to many people; Fama in his classic paper (Fama 1970) and other financial economists who have built on his work are clear on what is meant by the term. It is nothing more than the statement that security prices fully reflect all available information. If this hypothesis is true, or nearly true, the burden is on asset managers to show that they can add value. In a world of nearly efficient capital markets, one can no longer assume that making money by trading securities is easy. Moreover, the rapid growth of advanced and access to large and ever-growing sources of data make this proposition truer today than it was when Fama's work was originally published. The rise of hedge funds, private equity, and both plain vanilla and exotic exchange-traded funds (ETFs) since 1965 has only increased the competitive pressure on public investment funds. What is the role of the investment manager in this new world? On average, outperforming a benchmark that represents the average manager is difficult, particularly after all fees and expenses are accounted for. But this understanding does not deny the reality that skilled managers can outperform. Successful asset management is, therefore, a skill that must be demonstrated. In the conclusion of Fama (1965b), the author wrote, "The analyst cannot merely protest that he thinks the securities he selects do better than randomly selected securities; he must demonstrate that this is, in fact, the case." (p. 59). Fama's paper was, in fact, a call for the professionalization of investment management, and its publication marked a point of change in the history of investment. The Practical Implications of the EMH In the years following the publication of Fama (1965), practitioners could easily dismiss the EMH as irrelevant. In an interesting interchange on the EMH, Michael Jensen argued that, in the end, given the large amount of data that is increasingly becoming available, conclusions about the EMH were an empirical issue (Jensen 1967). His study published the following year (Jensen, 1968) was shocking. It showed that mutual funds for which data were then available did not outperform the market on an appropriate risk-adjusted basis. Although recent research challenges the view that active management cannot add value, outperformance remains elusive and requires skill. In my view, at least, it is not accidental that in the same issue of the Journal in which Jensen (1967) appeared, there was a significant discussion about the need to establish and reaffirm the professional status of security analysis (Ketchum 1967). Skill cannot be assumed. It must be demonstrated and shown. Behavioural Finance and the EMH Few academics today really believe in the EMH. The stock market crash of 1987 was a serious challenge to those who believed that the hypothesis was an accurate description of the way security markets work. The way securities are traded clearly influences prices, contrary to the EMH. Some argued that behavioural psychology had a role to play in explaining why the crash occurred (Ferguson 1989). The publication of Irrational Exuberance (Shiller 2000) was exquisitely timed to come out just a few weeks before the bursting of the dot-com bubble in March 2000. As a result, the study of the behavioural factors that influence prices is a standard part of the current academic writing in financial economics. Ingersoll (1987) showed that the EMH is an implication of general equilibrium theory in a capital market dominated by informed and rational agents. The behavioural view of the markets challenges this framework. This view was largely based on a series of papers by cognitive psychologists Daniel Kahneman and Amos Tversky, who reported on human subject experiments in the 1970s. Their initial paper, which showed how individuals tend to over-extrapolate from limited evidence (Tversky and Kahneman, 1971), questioned the extent to which individuals could actually be informed. Their later work (e.g., Kahneman and Tversky, 1979) showed that individuals react differently to losses than to gains. This result questioned whether individuals could be rational in the sense assumed in standard general equilibrium arguments of the kind often used to justify the EMH. Richard Thaler is often credited with bringing these views into the mainstream of economic thought, which Kahneman himself acknowledged upon receiving the Nobel Prize for his work in 2002. By the time the special issue of the Journal was published in 1999, Thaler was arguing that the behavioural view of the markets was no longer controversial (Thaler, 1999). By that point, he considered that most economists no longer believed that individuals are rational in the sense that they obey the axioms of expected utility theory or are capable of making unbiased forecasts of the future. Therefore, he maintained that supporting the position that asset prices are set by rational investors is problematic. He used a striking analogy to explain that, although one cannot argue that the direction a drunken person takes across a field is based on rational choice, if asset prices depended on the path the drunk adopted, it would be a good idea to study how drunks navigate. Many articles have been published in the pages of the Journal that address how behavioural factors influence asset prices. Early studies examined investor psychology as a way of explaining the day-of-the-week effect (Rystrom and Benson 1989) and other calendar anomalies (Jacobs and Levy 1988). In fact, the non-random behaviour of price changes by day of the week had already been noted much earlier in the Financial Analysts Journal (Cross 1973). The Financial Analysts Journal has published a number of articles that advocate taking investment tilts on the basis of many behavioural biases that have emerged from academic research. For example, Scott, Stumpp, and Xu (1999) argued that overconfidence, the tendency to overestimate one's unique abilities and the quality of one's information for making decisions, and the representativeness bias, the tendency to over-extrapolate from a small sample (Kahneman and Tversky, 1972), might explain the use of relative-value metrics as measures of investor overconfidence for slow-growth companies. Earnings growth might be extrapolated irrationally to suggest that companies will continue to grow in the future. As Daniel and Titman (1999) observed, the representativeness bias might also explain the success of momentum strategies that assume that past performance will continue in the future-but at the risk of significant drawdowns (Daniel and Moskowitz, 2016). Indeed, since about 2000, the Financial Analysts Journal has published many articles documenting the ways-both great and small-that financial market prices diverge from what might be perceived as rational. Most, if not all, of these anomalies, can be attributed to behavioural factors. Shiller (2002) described the various behavioural biases that can lead to booms and crashes in the asset markets. In addition to overconfidence and the representativeness bias, he noted that attention errors, which arise from an inconsistent focusing of our energies, and wishful thinking, which comes from the tendency to ascribe too high a probability to a desired outcome, also have a role to play.