Related papers: Markets are efficient if and only if P = NP
I prove that competitive market outcomes require computational intractability. If P = NP, firms can efficiently solve the collusion detection problem, identifying deviations from cooperative agreements in complex, noisy markets and thereby…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
We propose to study market efficiency from a computational viewpoint. Borrowing from theoretical computer science, we define a market to be \emph{efficient with respect to resources $S$} (e.g., time, memory) if no strategy using resources…
I summarize the recent work on market (in)efficiency, highlighting key elements why financial markets will never be made efficient. My approach is not by adding more empirical evidence, but giving plausible reasons as to where inefficiency…
Matching markets are of particular interest in computer science and economics literature as they are often used to model real-world phenomena where we aim to equitably distribute a limited amount of resources to multiple agents and…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
Efficient computability is an important property of solution concepts in matching markets. We consider the computational complexity of finding and verifying various solution concepts in trading networks-multi-sided matching markets with…
Energy market designs with non-merchant storage have been proposed in recent years, with the aim of achieving optimal market integration of storage. In order to handle the time-linking constraints that are introduced in such markets,…
Summarized by the efficient market hypothesis, the idea that stock prices fully reflect all available information is always confronted with the behavior of real-world markets. While there is plenty of evidence indicating and quantifying the…
NP complete problem is one of the most challenging issues. The question of whether all problems in NP are also in P is generally considered one of the most important open questions in mathematics and theoretical computer science as it has…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…
Researchers have long proposed using economic approaches to resource allocation in computer systems. However, few of these proposals became operational, let alone commercial. Questions persist about the economic approach regarding its…
Electricity market operators worldwide use mixed-integer linear programming to solve the allocation problem in wholesale electricity markets. Prices are typically determined based on the duals of relaxed versions of this optimization…
This article finds the answer to the question: for any problem from which a non-deterministic algorithm can be derived which verifies whether an answer is correct or not in polynomial time (complexity class NP), is it possible to create an…