Related papers: A Modern Approach to the Efficient-Market Hypothes…
We study information elicitation in cost-function-based combinatorial prediction markets when the market maker's utility for information decreases over time. In the sudden revelation setting, it is known that some piece of information will…
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…
Within a general semimartingale framework, we study the relationship between collective market efficiency and individual rationality. We derive a necessary and sufficient condition for the existence of (possibly zero-sum) exchanges among…
Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
This paper analyzes repeated version of the bilateral trade model where the independent payoff relevant private information of the buyer and the seller is correlated across time. Using this setup it makes the following five contributions.…
A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is…
The efficient market hypothesis has been considered one of the most controversial arguments in finance, with the academia divided between who claims the impossibility of beating the market and who believes that it is possible to gain over…
We examine weak anticipations in discrete-time and continuous-time financial markets consisting of one risk-free asset and multiple risky assets, defining a minimal probability measure associated with the anticipation that does not depend…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
We consider the impact of fairness requirements on the social efficiency of truthful mechanisms for trade, focusing on Bayesian bilateral-trade settings. Unlike the full information case in which all gains-from-trade can be realized and…
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…
Digital marketplaces processing billions of dollars annually represent critical infrastructure in sociotechnical ecosystems, yet their performance optimization lacks principled measurement frameworks that can inform algorithmic governance…
The concept of efficiency plays a prominent role in the formal solution of decision problems that involve incomparable alternatives. This paper develops necessary and sufficient conditions for the efficient points in a sum of sets of…
We demonstrate market inefficiency in cryptoasset markets. Our approach examines investments that share a dominant risk factor but differ in their exposure to a secondary risk. We derive equilibrium restrictions that must hold regardless of…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment…