The efficient market hypothesis removes the human being from economic decision-making by modeling preference mechanically, whereas actual investor behavior includes non-mathematical components like tax treatment advantages, 401k matches, and other human reaction functions that cannot be easily modeled.
factualpending
Speaker
Dave NodicEvidence Quote
“the efficient market hypothesis is foundationally foundationally removes the human being from the decision, right? It is a mechanical explanation of preference and behavior. what what I think we have discovered in the intervening years as we've developed now things like the inefficient the inelastic market hypothesis um is that human behavior has all of these components that are not necessarily easily described by these sort of mathematical preferences and patterns of returns like for instance the tax treatment advantages of investing a certain way versus another way the free money from uh 401k matches all of these very human reaction function that are very very difficult to model.”
Source
The Trillion Dollar Trap | Mike Green on Passive Investing's Fatal Design Flaw— Excess ReturnsCreated: 8/11/2026, 5:27:10 AM
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