  We argue that an important contributing factor into market inefficiency is
the lack of a robust mechanism for the stock price to rise if a company has
good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone
to volatility due to rather random perception/interpretation of earnings
announcements (among other data) by market participants. We present empirical
evidence indicating that dividend paying stocks on average are less volatile,
even factoring out market cap. We further ponder possible ways of increasing
market efficiency via 1) instituting such a mechanism, 2) a taxation scheme
that would depend on holding periods, and 3) a universal crossing
engine/exchange for mutual and pension funds (and similar long holding horizon
vehicles) with no dark pools, 100% transparency, and no advantage for timing
orders.
