Jim Davis over at sci.space.policy points out an article with an interesting example of how smart markets can be. They figured out which company was responsible for the Challenger disaster within minutes of the event, and long before the Rogers Commission was even convened, let alone issued its report six months later.

As the news broke, the authors write, the stock prices of all four companies fell anywhere from 2.83 percent to 6.12 percent in the 21 minutes after the crash. But trading was halted only on the stock of Morton Thiokol. “The fact that market liquidity was available to maintain a market in Lockheed, Martin Marietta, and Rockwell while the market for Morton Thiokol dried up suggests that the stock market discerned the guilty party within minutes of the announcement of the crash,” Maloney and Mulherin conclude. By the end of the day?when the cause of the accident was still a mystery?Morton Thiokol was down 11.86 percent, while the other three contractors lost 2 percent to 3 percent.