I don't think the concept of feedback inside stochastic systems really needs another name/buzzword.
"Reflexivity" is just another concept that has been both borrowed and misunderstood by the investor community. Complex systems have internal feedback loops that around equillibrium. The human body maintaining homeostasis operates by very similar principles.
It doesn't prove or disprove anything about the efficient market hypothesis. Crowd wisdom certainly exists and denying its existence seems like delusion. The OPs argument seems to be some variant of the NAXALT fallacy ("Not all X Are Like That") - not all markets are rational - at least to the observer, is again somewhat self-evident.
However, the implications of these exceptions disproving the rule is that there is a rule to begin with - and that rule is the EMH. What one has observe is that the users of this systems have decreasingly little understanding of systems in general; and tend to conflate the brokenness of markets with personally bad outcomes.
Blaming abstract concepts like the 'market' for being 'broken' is akin to blaming the hypothalamus for not working because you shot its owner in the head. For all the worry about runaway feedback loops, it's fair to say that the vast majority of them function more or less as intended.
There are already existing concepts like hysteresis, wicked problems, stochastic systems that sufficiently describe the phenomenon at play here - "Reflexivity" is just a buzzword that describes a small feature of these systems as it were the keystone to enlightenment.
One reason why I enjoy writing these posts is because it attracts people from all disciplines. It's great hearing what it looks like from a purely statistician POV! These reasons only exist when viewed from the financial status quo - I can't count how many people outside of finance have told me similar things!
Reflexivity is so much fun to consider, but it took me a while to get there. It's the same thing as the observation problem in physics, where looking at something changes that system, or creating a sculpture where the clay itself kind of leads the way.
As someone whose specialism is in management and systems design, I find it utterly wild that people even bother to engage with the concept of EMH. It’s so demonstrably false and divorced from reality that I have to pinch myself to remind myself people still think this way. Like, where have you people been for the last 100 years?
I don't think the concept of feedback inside stochastic systems really needs another name/buzzword.
"Reflexivity" is just another concept that has been both borrowed and misunderstood by the investor community. Complex systems have internal feedback loops that around equillibrium. The human body maintaining homeostasis operates by very similar principles.
It doesn't prove or disprove anything about the efficient market hypothesis. Crowd wisdom certainly exists and denying its existence seems like delusion. The OPs argument seems to be some variant of the NAXALT fallacy ("Not all X Are Like That") - not all markets are rational - at least to the observer, is again somewhat self-evident.
However, the implications of these exceptions disproving the rule is that there is a rule to begin with - and that rule is the EMH. What one has observe is that the users of this systems have decreasingly little understanding of systems in general; and tend to conflate the brokenness of markets with personally bad outcomes.
Blaming abstract concepts like the 'market' for being 'broken' is akin to blaming the hypothalamus for not working because you shot its owner in the head. For all the worry about runaway feedback loops, it's fair to say that the vast majority of them function more or less as intended.
There are already existing concepts like hysteresis, wicked problems, stochastic systems that sufficiently describe the phenomenon at play here - "Reflexivity" is just a buzzword that describes a small feature of these systems as it were the keystone to enlightenment.
That’s very informative. Thx
One reason why I enjoy writing these posts is because it attracts people from all disciplines. It's great hearing what it looks like from a purely statistician POV! These reasons only exist when viewed from the financial status quo - I can't count how many people outside of finance have told me similar things!
Reflexivity is so much fun to consider, but it took me a while to get there. It's the same thing as the observation problem in physics, where looking at something changes that system, or creating a sculpture where the clay itself kind of leads the way.
As someone whose specialism is in management and systems design, I find it utterly wild that people even bother to engage with the concept of EMH. It’s so demonstrably false and divorced from reality that I have to pinch myself to remind myself people still think this way. Like, where have you people been for the last 100 years?