Markets are efficient if and only if P = NP

[R.A. Hettinga]

Sigh.

Cheers,
RAH
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<http://arxiv1.library.cornell.edu/abs/1002.2284>arXiv.org > q-fin >
arXiv:1002.2284


Quantitative Finance > General Finance
Markets are efficient if and only if P = NP
Philip Maymin
(Submitted on 11 Feb 2010)
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 solved in polynomial time. I also prove the converse by showing how we
can "program" the market to solve NP-complete problems. Since P probably does
not equal NP, markets are probably not efficient. Specifically, markets become
increasingly inefficient as the time series lengthens or becomes more
frequent. An illustration by way of partitioning the excess returns to
momentum strategies based on data availability confirms this prediction.
Subjects:
General Finance (q-fin.GN); Computational Complexity (cs.CC)
Cite as:
arXiv:1002.2284v1 [q-fin.GN]
Submission history
From: Philip Maymin [view email]
[v1] Thu, 11 Feb 2010 05:56:16 GMT (46kb,X)
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