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Friday, October 21, 2011

Soccer and Efficient Market Hypothesis

I always enjoy showing my students live examples of how EMH works in reality. I usually use an online earnings call while looking at the stock prices, tick by tick. This week for instance, I shared the afterhours drop in the price of Apple after their earnings miss. Students are generally impressed by this market wisdom and by how quickly prices incorporate information.

But every now and there are some situations that leave me speechless.

Coincidentally this week I witness one such moment. Please bear with me.

My favorite Chilean soccer club: Universidad de Chile (not related to any university), like many others in Chile is a publicly traded company trading under the mnemonic AZUL AZUL. Yes, imagine the Patriots, Cowboys, Sox and Yankees trading in the NYSE.

My team’s share price went up this Friday. A lot! It went up so much that the bourse had to stop trading when it had literally doubled in value.  After trading was re-started it settled for a67% gain. This on top of a 28% gain on Thursday.

The reason? On Wednesday the team had a superlative performance (4-0) against Flamengo a Brazilian team in a South-American tournament.

You can watch the beautiful 4th goal here.

I am buying some AZUL AZUL!!!

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