Seeing the apparent logical soundness of the EMH, Michael Jensen had famously stated that “there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Market Hypothesis.” (Stout, 2003, p.635) Looking back in retrospect, it is easy to see how popular the EMH had been during the middle of the century. In fact, not only did ‘market efficiency’ become a buzzword among financial analysts by the 1980s but the concept was recognized as fact even by regulators, judges and research scholars from other allied fields. (Shleifer & Summers, 1990, p.704) But the fad has faded over the last three decades.
In the article titled The Superinvestors of Graham and Doddsville, author Warren Buffett gives a classic rebuttal of the Efficient Market Hypothesis. Buffett employs wit and humor alongside statistical evidence to present arguments in support of market inefficiency. Buffett gathers the investment performance of some eminent pupils of Benjamin Graham’s school of value investing – all of whom have also worked under Graham during the 1950s. These include Walter Schloss, Tom Knapp, Ed Anderson, etc, not to mention Buffett himself. The funds conceived and run by these stalwarts are now part of investment folklore, as they managed to outperform the markets year in and year out for decades. When we compare the annually published reports of funds such as Walter J. Schloss (WSJ) Ltd. Partners, Tweedy Browne Inc., Buffett Partnership Ltd, and Sequoia Fund Inc, there is compelling evidence that .contradicts EMH. . For example, the annualized return of JWS Ltd. Partners is an impressive 16.1%, which is double the return fetched by S&P’s Index Fund over the corresponding 28 year period. . .