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The basis of modern portfolio theory, the efficient market hypothesis, maintains that all information is already discounted by the market and reflected in share prices due to market participants acting upon the information. In reality, markets tend to be inefficient because information dissipates slowly through the market and because not all investors act on the information that they receive correctly. Patterns in share prices also arise because of group investor psychology which tends to give a "herd" effect to market movements. David Dreman in Forbes Magazine said of the efficient market hypothesis, "This absurd thesis holds that nobody can beat the market, that stocks are correctly priced according to what is publicly known about them and mispricings are chimeras. Such blind faith in the market's omniscient rationality led to investor losses of trillions of dollars in the 1987 crash and several trillion dollars in the 2000 - 2002 post bubble slump".

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