In my thread "An Experiment", the criticism is that my experiment is much riskier than the S&P 500, and so higher returns are expected. One measure of risk is Beta, by which measure my experiment's risk adjusted returns (returns divided by stock's Beta) are less than the market. So maybe the experiment does confirm EMH.
I viewed the stocks I picked as having very high default risk, with most investors being unwilling to take those risks. When I started, I thought people like Buffet were investing the same way I was, and would have a great year. So I was sad to learn Buffet dumped his position in Delta Airlines (at a loss). I bought and held two airline stocks that did very well (especially when I switched to call options).
I think I just collected more information about Covid-19 than most investors, and was more comfortable when panic hit. Back in March 2020 the NY Times published an expose of U.S. Covid-19 testing, which reflected the mainstream view. About the same time, a Corona virus task force member announced cases were about to increase because testing was increasing exponentially. I checked the data - the NY Times was 2 weeks out of date, which in terms of exponential growth, is just wrong. So I went with data almost nobody was using, and predicted the end of the panic on Mar 20-21 (real date was Mon, Mar 23). There's a post I can dig up where I predicted the bottom, and nailed it within 2%.
I don't expect to do that again, nor do I expect the opportunity to occur again. Can EMH just be invalid in 2020? Or does that invalidate EMH overall?
Personally, I'm allowing the contradictions to co-exist. When I'm on top of something like Covid-19 prediction, I tried to beat the market. When I lack any data better than the market, I'm back with EMH.
There's no doubt the Experiment was a higher-risk portfolio than the index. Borrowing on margin to buy the index in March 2020 would have yielded a similar risk-return outcome. This is all compatible with EMH and the CAPM. Investors demand higher returns (will only pay a cheaper price) for cash flows that are less certain or more volatile.
Additionally, the pandemic was a new piece of information affecting the size and probability of future cash flows for all companies. Once the pandemic became known to investors, there were multiple decision trees of uncertainty and different paths events could have taken. For example:
1) The Trump administration could have coordinated with CDC experts instead of opposing them, for example acting on the recommendation to mail a week's supply of cloth masks to every US address, invoked the DPA to increase production of PPE, allowing more imports of PPE, not spreading misinformation, not holding rallies, etc. These decisions were completely unpredictable.
2) Operation Warp Speed might never have been launched, or it could have been administered incompetently by the known-incompetent administrators, and the tsunami of research money that produced at least 4 approved vaccines within months might have never flowed.
3) Had the deadliness or contagion factor of the virus been a couple decimal points higher, we'd have millions of deaths by now instead of ~600k, prolonged shortages of things, and perhaps mass panic.
4) Had stimulus legislation not passed, had it been smaller, or if it passed but funding was held up in bureaucracy set up to reduce fraud, the economy would be in a much worse place today - possibly a deflationary spiral. Recall the small, ineffectual checks mailed out by the IRS in the summer of 2008.
5) Had the new more contagious / more deadly variants evolved a few months sooner than they did...
6) Had vaccine development proved to be more technically tricky... (at the time, no vaccine had yet been made for a coronavirus)
7) Small cultural things - like the percentage of churchgoers refusing to social distance or the likelihood for teachers to be strict in rule enforcement - could have made a big difference in the rate of spread.
8) Was the Trump administration using the pandemic crisis as an excuse to delay or prevent the 2020 election? If that turned out to be the plan, the ensuing conflict would have been very bad for stocks, as it was in Turkey, Egypt, etc. (It could be they really were making that plan, but the polls were close enough they chose to take their chances with the election instead of taking their chance with the other option. Again, very unpredictable.)
etc...
But these were all bits of information. That's why I'm thinking about chaotic events, or even informational events that don't affect the probability of future cash flows. E.g an internal issue at company X affects the stock price of completely unrelated company Y by causing investors or index funds to rebalance their portfolios by selling company Y. In that example, the market or index as a whole would incorporate all available information, but company Y's stock would be depressed compared to what the info would predict, at least until arbitrageurs step in. That time period between the rebalance and the arbitrage would be a violation of EMH that someone could, in theory, capitalize on. This arbitrage might look a lot like momentum investing.