Related papers: Quantification of market efficiency based on infor…
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…
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…
We determine the amount of information contained in a time series of price returns at a given time scale, by using a widespread tool of the information theory, namely the Shannon entropy, applied to a symbolic representation of this time…
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…
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…
Entropy is a very useful concept from physics that tries to explain how a system behaves from a point of view of the thermodynamics. However, there are two ways to explain entropy, and it depends on if we are studying a microsystem or a…
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…
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…
The distribution of efficient individuals in the economy and the efforts that they will put in if they are hired, there are two important concerns for a technologically advanced firm. wants to open a new branch. The firm does not have…
I prove that if markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be…
Complex systems are found in most branches of science. It is still argued how to best quantify their complexity and to what end. One prominent measure of complexity (the statistical complexity) has an operational meaning in terms of the…
Modern mainstream financial theory is underpinned by the efficient market hypothesis, which posits the rapid incorporation of relevant information into asset pricing. Limited prior studies in the operational research literature have…
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…
Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…
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…
Entropy is a measure of self-information which is used to quantify losses. Entropy was developed in thermodynamics, but is also used to compare probabilities based on their deviating information content. Corresponding model uncertainty is…
Inference is a versatile tool that underlies scientific discovery, machine learning, and everyday decision-making: it describes how an agent updates a probability distribution as partial information is acquired from multiple measurements,…
Motivated by recent progress on pricing in the AI literature, we study marketplaces that contain multiple vendors offering identical or similar products and unit-demand buyers with different valuations on these vendors. The objective of…
In order to automate actions, such as defences against network attacks, one needs to quantify their efficiency. This can subsequently be used in post-evaluation, learning, etc. In order to quantify the defence efficiency as a function of…
In the context of applied game theory in networking environments, a number of concepts have been proposed to measure both efficiency and optimality of resource allocations, the most famous certainly being the price of anarchy and the Jain…