Gillian Tett writes in the FT:
For the past five decades, the Chartered Financial Analyst Institute has been teaching the tenets of analysis based on efficient markets to tens of thousands of adherents from banks, fund managers and investment houses that make up the global financial system.
Now, however, the credit crisis has forced high priests of rational market theory to question their own creed.
The British CFA recently asked members for the first time whether they trusted in “market efficiency” – and discovered more than two-thirds of respondents no longer believed market prices reflect all available information. More startling, 77 per cent of the group “strongly” or “very strongly” disagreed that investors behaved “rationally” – in apparent defiance of the “wisdom of crowds” idea that has driven investment theory.
Tett’s right that CFA Institute teachings have been heavily influenced by efficient market theory for decades (I don’t know about five decades; the switch came in the 1970s). But I imagine that for many of those who took the CFA exam through the years, this was a matter of learn and quickly forget. For lots of (probably most) financial analysts, finding ways to beat the market was always the point. So I’m not sure if it’s really that big a surprise to learn that two-thirds of them don’t think the market is efficient (a.k.a. unbeatable).