More on United Airlines & the Efficient Market Hypothesis

Posted on September 14, 2008


While with a friend today at a rare Saturday afternoon poker game, we got talking about the United Airlines bankruptcy story that inadvertantly crept up to the top of the headlines earlier this week. As a hedge fund guy, we laughed and said he watched the stock fall in real time. His boss asked what was happening – “United’s filed for bankruptcy.” Once the headline hit his computer screen, the stock began to free fall.

Here’s the stock chart from the last 10 days:

And the trading volume:

I found the charts interesting for a couple of reasons. First, the sharp decline on the heavy volume of positions dumping their shares. Second, the subsequent recovery of the stock once the market understood the story to be old news from 2002. Always nice to see the financial markets work efficiently.

Posted in: finance