The EMH is only true at a zero-th approximation. There are many reasons why arbitragers cannot fix wrong prices, see e.g. “The Limits of Arbitrage” by Schliefer. There is a whole literature on this, not all of which is valid. Keynes said that markets can stay wrong longer than you can stay solvent.
All this suggests that prices can vary from value, but that it may not be too easy to make money from this insight.
I don’t know the specifics of Hertz but very low stock prices tend to reflect the option values inherent in the asset. There might be a possibility that a Venture capital fund may want the stock for some reason. Even small possibilities, of large payouts, can move the price.
There is a lot more to finance than first appears. In the book series “market wizards”, several traders comment that they have read hundreds of books on the topic, on top of their own research. My own experience over almost 40 years is that it is at a degree of difficulty similar to learning physics to an advanced level, and on top of that it is very challenging psychologically.
very low stock prices tend to reflect the option values inherent in the asset
+1 to this specifically. There’s no way for Hertz’ creditors to charge stockholders money (other than what they paid to hold the stock), and there’s a nonzero chance that Hertz somehow ends up being worth something, so it would be an arbitrage opportunity in the strongest possible sense if Hertz’ shares were actually priced at $0.00. The value must be strictly greater than zero at the very least, although it’s not at all clear that it should be as high as it is.
The EMH is only true at a zero-th approximation. There are many reasons why arbitragers cannot fix wrong prices, see e.g. “The Limits of Arbitrage” by Schliefer. There is a whole literature on this, not all of which is valid. Keynes said that markets can stay wrong longer than you can stay solvent.
All this suggests that prices can vary from value, but that it may not be too easy to make money from this insight.
I don’t know the specifics of Hertz but very low stock prices tend to reflect the option values inherent in the asset. There might be a possibility that a Venture capital fund may want the stock for some reason. Even small possibilities, of large payouts, can move the price.
There is a lot more to finance than first appears. In the book series “market wizards”, several traders comment that they have read hundreds of books on the topic, on top of their own research. My own experience over almost 40 years is that it is at a degree of difficulty similar to learning physics to an advanced level, and on top of that it is very challenging psychologically.
+1 to this specifically. There’s no way for Hertz’ creditors to charge stockholders money (other than what they paid to hold the stock), and there’s a nonzero chance that Hertz somehow ends up being worth something, so it would be an arbitrage opportunity in the strongest possible sense if Hertz’ shares were actually priced at $0.00. The value must be strictly greater than zero at the very least, although it’s not at all clear that it should be as high as it is.