Reply: The Optimal Price to Trade

Abstract

Edward Miller's basic point (see “Comment” in this issue) may be put rather briefly: If market prices follow the random walk model precisely (I assume he refers to the semi-strong form of the efficient market hypothesis), there are no gains to be made from a trading strategy which involves waiting for more attractive prices. In a fully efficient market the price is always in line with the available information and thus never becomes either more or less attractive than the relevant information set would allow.