Consensus Market Hypothesis: This is Not a Guide to Market Manipulation

Abstract

This is a general eclectic theoretical framework that attempts to provide another practical understanding of how the market works and how to invest with chaos, non-ergodicity and inefficiency. It covers bubbles, corrections, volatility, correlation disturbances in crises by means of behaviorism and aspects of information, game and chaos theories and how market reality as a consensus is shaped. The article also touches on equilibrium as a reflection of expected normality, the danger of market “efficiency” in the light of non-ergodicity, information diffusion with market manipulation, the relativity of rationality, why pumping and bubbles are natural and why we should lower short-term capital gains taxes to the level of long-term ones in order to support the sustainability of the market. Current regulation and taxation policies jeopardize the long-term market's sustainability by undermining diversity and inclusion.

Old orthodox academic theories and views in financial economics are contradictory not only to themselves but also to the reasonableness and meaning of the entire industry. The author is a practitioner who is not bound by academia in financial economics. This article is written in a straightforward style that is more typical for essays. It skips the evolution of economic thought as well as obvious criticisms, and the function is to transmit and communicate with a broad audience.

Keywords: Information diffusion, Market efficiency, Irrationality, Factor investing, Random walk, Deterministic chaos, Fat tail risk, Market-timing

JEL Classification: D8,G01,G02,G11,G14,G18