Letters to the Editor - 16/10 - Rational markets, EU relationship, Best of Twitter

Rational markets

[Re: What the latest Nobel Prize winners in economics can teach us, yesterday]

Of course rational market theory assumes investors use all information in a detached and continuous way, and completely ignores behavioural finance. And the idea of mean reversion is correct in theory, but in practice often there are new informational disturbances before prices settle on mean equilibrium. One City bank had proprietary models which it was very proud could estimate the real economic value of exchange rates. The idea of mean reversion was observable, but only as a line to cross through, with significant variance either side.

Name wittheld

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EU relationship

[Re: As the debate over Britain’s role in Europe continues, should we remain in the EU?, yesterday]

Ruth Lea rightly makes the point that there will be no cessation of trade with Europe in the event of a British exit (a Brexit) from the EU – we are the net customer. Reform from within has been the policy for decades now, and we have given in to more legislation leading to increased inefficiency. It is time that we stopped bluffing. Foreign direct investment into the UK is very healthy despite the real threat of Brexit, which means some investors see Britain leaving the EU as inconsequential.

Tim Goldfinch

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BEST OF TWITTER

UK CPI inflation remains stubbornly above target at 2.7 per cent, and the MPC can’t blame world prices.
@asentance

Latest YouGov share of 37 per cent for the Tories is the best for the party since 16 March 2012.
@MSmithsonPB

Shorts building on Royal Mail among IG client accounts. Now 36 per cent are short.
@DavidJones_IG

Don’t read too much into ONS claim UK house prices at record high. They are weighted towards London.
@matpointon