Efficient Markets, Value Neutrality and Symmetric Maximum Entropy Principle

Luo, Yinghao (2024): Efficient Markets, Value Neutrality and Symmetric Maximum Entropy Principle.

Abstract

We study the relationship between efficient markets, value neutrality and symmetric maximum entropy principle. We find that the efficient market is in the state of maximum information entropy, which means that market prices fluctuate randomly, that value neutrality is in the state of maximum value entropy, and that information symmetry can lead markets to reach efficient outcomes, while the symmetry of resource allocation is bound to lead to value neutrality, both of which mean they are in a symmetric maximum entropy state.

• Item Type: MPRA Paper
• Language: English
• Keywords: efficient markets, value neutrality, maximum entropy，information symmetry，symmetry of resource allocation
• Subjects: D - Microeconomics > D2 - Production and Organizations; D - Microeconomics > D3 - Distribution; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; F - International Economics > F3 - International Finance; G - Financial Economics > G1 - General Financial Markets

References

Fama, E. F. (1965). Random walks in stock market prices. Financial Analysts Journal, September/October, 55–59.

Luo,Yinghao (2017): Communism, Value Neutrality and Monetary Neutrality. Theoretical and Practical Research in the Economic Fields, Vol 8, No 2 (Winter 2017): pp.149-152. ISSN2068-7710. Available at: https://journals.aserspublishing.eu/tpref/article/view/1563

Luo,Yinghao,2020. "Symmetry, Efficient Markets and Monetary Neutrality," MPRA Paper 101891, University Library of Munich, Germany. https://mpra.ub.uni-muenchen.de/101891/1/

Luo,Yinghao (2022a). Understanding efficiency, Domain Destiny - Selected Essays by Yinghao Luo, Golden Light Academic Publishing, ISBN-10:6202413204，ISBN-13:978-6202413206

Luo,Yinghao (2022b). Understanding the universe, Domain Destiny - Selected Essays by Yinghao Luo, Golden Light Academic Publishing, ISBN-10:6202413204，ISBN-13:978-6202413206

Luo,Yinghao (2023a). Understanding the characteristics of life, Autumn leaves -- Essays by Yinghao Luo, Golden Light Academic Publishing, ISBN-13:978-620-2-41352-7，ISBN-10:6202413522

Luo,Yinghao (2023b). The strong, the weak, order and financial markets, The Door into Infinity - Essays by Yinghao Luo, Golden Light Academic Publishing, ISBN-13:978-620-2-41402-9， ISBN-10:6202414022