How to Determine if There Are Low-Hanging Fruits in the Market?

1. Is This Market Efficient?

What is an "efficient market"? In an efficient market, it is difficult to find assets with mispricing. Prices are completely determined by the balance of supply and demand. Anyone who wants to buy something can easily do so, and anyone who wants to sell something can easily sell it; this is an efficient market.

If you want to achieve excess returns, do not choose an efficient market, because demand can quickly find supply. When you discover an opportunity, others may have already found it. Even if others have not discovered this opportunity now, they will likely find it quickly in the future.

Should we choose an "inefficient" market then? Not necessarily, because there may be prices but no market. For example, in the real estate market, you know that housing prices will decline in the long term, but you cannot short it. Unless you have complete control over the supply and can negotiate freely.

2. Is This an Insufficient Equilibrium in an Efficient Market?

The better low-hanging fruits are the insufficient equilibria in efficient markets.

Insufficient = there are still low-hanging fruits to pick. Equilibrium = the interests of all parties involved have reached a balanced state, and no one is picking the fruits. If this is the case, experts are not to be feared, because what they want and what you want are not on the same dimension; they do not care about low-hanging fruits.