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Article: Efficiency and after. (classic economic theory versus computer prediction of capital markets) (Finance Survey)
- Article from:
- The Economist (US)
- Article date:
- October 9, 1993
- Author:
CopyrightCOPYRIGHT 1993 Economist Newspaper Ltd. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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SOON after the attempted coup in Russia in 1991, a retired hairdresser in Moscow realized that inflation was eating away her pension and her savings. She had noticed that clothes were always cheaper at one street market than at another one she visited near her daughter's home the other side of Moscow. As a good socialist she had always railed against profiteering middlemen, but she had an idea. She took 2,000 rubles from her savings, went to the cheap market and bought a pile of clothes; then she took the metro across the city and sold the clothes for 3,000 rubles at the other market. She had discovered arbitrage.
Arbitrage means buying something cheaply and ...