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Originally Posted by ibavly
Of course, not sure what your point here is. Are you trying to say EMH is basically truth in all states of the world but 'just a theory' as a technicality, similar to the round earth?
I'm not actually a proponent of EMH. There are too many anomalies. I am a proponent of markets being efficient-ish.
However, in real life, actual people overvalue lottery tickets (low cost, high upside) and insurance against catastrophic loss, and people dislike limited upside with huge downside enough for the price to not be 0 ev. This is consistent in markets that have no drift, those that have negative drift and those that have a positive drift. This is simply an empirical observation. The theory behind it really doesn't matter.
I can imagine a world ruled by lizard people in which the opposite were true (I'm unaware of any actual lizard people worlds). I can also imagine a world where option sellers make serious mistakes in their calculations (this actually happens).
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I would however debate your definition of risk averse, that seems to narrow.
We're only worried about risk as it relates to option pricing here. People really enjoy losing their house far less than they like losing $3.