With the Efficient Market Hypothesis it doesn't matter what people think because prices end up converging on reality. Everybody crunches SEC filings and stock/bond prices follow from that. That's relatively easy, and requires very little compute.
Hotz is arguing the opposite. His argument is that the market converges to some kind of consensus price, but that price is a combination of what people think a security is actually worth but also to a large part to what participants think other people mistakenly believe a security is worth.
Crunching SEC filings won't get you anywhere anymore. You also have to reverse engineer what other people believe, otherwise you end up waiting for years (or forever) for the market to come to your point of view. And when everybody acts on what they believe other people are thinking you can spend an infinite amount of compute trying to level each other. Unless one party has the majority of compute then they can outcompute everybody else put together.
Hotz is arguing the opposite. His argument is that the market converges to some kind of consensus price, but that price is a combination of what people think a security is actually worth but also to a large part to what participants think other people mistakenly believe a security is worth.
Crunching SEC filings won't get you anywhere anymore. You also have to reverse engineer what other people believe, otherwise you end up waiting for years (or forever) for the market to come to your point of view. And when everybody acts on what they believe other people are thinking you can spend an infinite amount of compute trying to level each other. Unless one party has the majority of compute then they can outcompute everybody else put together.