Document Type

Working Paper

Publication Date



Two decades ago, the Virginia Law Review published our article "The Mechanisms of Market Efficiency" (MOME), in which we tried to discern the institutional underpinnings of financial market efficiency. We concluded that the level of market efficiency with respect to a particular fact depends on which of several market mechanisms – universally informed trading, professionally informed trading, derivatively informed trading, and uninformed trading operates to reflect that fact in market price. Revisiting our article is particularly appropriate today. A new framework for evaluating the efficiency of the stock market, called "behavioral finance," and a growing number of empirical studies pose a serious challenge to the Efficient Markets Hypothesis. Twenty years have made us appropriately more skeptical of the efficiency of those institutions.


Banking and Finance Law | Law | Law and Economics


Center for Law and Economic Studies


Center for Contract and Economic Organization