Munich Personal RePEc Archive

Financial Market Efficiency Should be Gauged in Relative Rather than Absolute Terms

Da Silva, Sergio (2015): Financial Market Efficiency Should be Gauged in Relative Rather than Absolute Terms. Published in: Journal of Stock & Forex Trading , Vol. 4, No. 1 (2015): p. 140.

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Abstract

Economists assess the efficiency of financial markets in absolute, all-or-nothing terms. However, this is at odds with a no-nonsense physics approach. Here, I describe how the relative efficiency of markets can be gauged taking advantage of algorithmic complexity theory. This is not physics-envy because the approach is superior in considering the proper randomness present in complex financial markets.

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