Algorithmic complexity theory and the relative efficiency of financial markets

Financial economists usually assess market efficiency in absolute terms. This is to be viewed as a shortcoming. One way of dealing with the relative efficiency of markets is to resort to the efficiency interpretation provided by algorithmic complexity theory. We employ such an approach in order to rank 36 stock exchanges and 20 US dollar exchange rates in terms of their relative efficiency.

• Publication year

  2008

• Venue

  EPL (Europhysics Letters)

• Publication date

  2008-11-01

• Fields of study

  Mathematics, Physics, Computer Science, Economics

• Identifiers
  DOI 10.1209/0295-5075/84/48005
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

• LZ Complexity Distance of DNA Sequences and Its Application in Phylogenetic Tree Reconstruction

  2016cited by this paper
• Are pound and euro the same currency

  2007cited by this paper
• The Chinese chaos game

  2007cited by this paper
• Efficient Capital Markets: A Review of Theory and Empirical Work

  2007cited by this paper
• Multifractality and heteroscedastic dynamics: An application to time series analysis

  2007cited by this paper
• Market efficiency in foreign exchange markets

  2006cited by this paper
• Complexity analysis of the fetal heart rate for the identification of pathology in fetuses

  2005cited by this paper
• Quantifying signals with power-law correlations: a comparative study of detrended fluctuation analysis and detrended moving average techniques.

  2004cited by this paper
• Multifractal properties of price fluctuations of stocks and commodities

  2003cited by this paper
• Using a Stochastic Complexity Measure to Check the Efficient Market Hypothesis

  2003cited by this paper
• Effect of trends on detrended fluctuation analysis.

  2001cited by this paper
• Measures of Temporal Pattern Complexity

  2000cited by this paper
• Physiological time-series analysis using approximate entropy and sample entropy.

  2000cited by this paper
• THE EFFICIENT MARKET HYPOTHESIS: A SURVEY

  2000cited by this paper
• An Introduction to Econophysics: Correlations and Complexity in Finance

  1999cited by this paper
• Estimating the Complexity Function of Financial Time series: An Estimation Based on Predictive Stochastic Complexity

  1999cited by this paper
• THE ECONOMETRICS OF FINANCIAL MARKETS

  1996cited by this paper
• Limited Market Participation and Volatility of Asset Prices

  1994cited by this paper
• Approximate entropy as a measure of system complexity.

  1991cited by this paper
• Easily calculable measure for the complexity of spatiotemporal patterns.

  1987cited by this paper
• On the Complexity of Finite Sequences

  1976cited by this paper
• ON THE EFFICIENCY OF COMPETITIVE STOCK MARKETS WHERE TRADES HAVE DIVERSE INFORMATION

  1976cited by this paper
• The Random Character of Stock Market Prices.

  1965cited by this paper
• SAMUELSON, . Proof that properly anticipated prices fluctuate randomly, Industrial Management Review, .

  1965cited by this paper
• The Behavior of Stock-Market Prices

  1965cited by this paper
• ALEXANDER, . Price Movements in Speculative Markets: Trends or Random Walks, No. 2. Industrial Management Review, , .

  1964cited by this paper
• STOCK‐MARKET “PATTERNS” AND FINANCIAL ANALYSIS: METHODOLOGICAL SUGGESTIONS

  1959cited by this paper
• The Analysis of Economic Time‐Series—Part I: Prices

  1953cited by this paper
• The economic nature of the firm: The use of knowledge in society

  1945cited by this paper
• Théorie de la spéculation

  year unknowncited by this paper

• Smiles or tears? How emojis power a semistrong efficient market of bitcoin: A comprehensive analysis of decision tree models

  2026cites this paper
• Traditional finance, digital finance, and financial efficiency: An empirical analysis based on 19 urban agglomerations in China

  2024cites this paper
• Differential entropy estimation with a Paretian kernel: Tail heaviness and smoothing

  2024cites this paper
• Semi-strong Efficient Market of Bitcoin and Twitter: an Analysis of Semantic Vector Spaces of Extracted Keywords and Light Gradient Boosting Machine Models

  2023cites this paper
• Fractal properties, information theory, and market efficiency

  2023cites this paper
• Vulnerability of sustainable markets to fossil energy shocks

  2023cites this paper
• Variance of entropy for testing time-varying regimes with an application to meme stocks

  2022cites this paper
• Measuring market efficiency: The Shannon entropy of high-frequency financial time series

  2022cites this paper
• Efficiency of the Moscow Stock Exchange before 2022

  2022cites this paper
• A statistical test of market efficiency based on information theory

  2022cites this paper
• Predictors of oil shocks. Econophysical approach in environmental science

  2021cites this paper
• Econophysics of cryptocurrency crashes: a systematic review

  2021cites this paper
• Econophysics of cryptocurrency crashes: an overview

  2021cites this paper
• Complexity Changes in the US and China’s Stock Markets: Differences, Causes, and Wider Social Implications

  2020cites this paper
• Lempel-Ziv Complexity and Crises of Cryptocurrency Market

  2020cites this paper
• Time-dependent complexity measurement of causality in international equity markets: A spatial approach

  2018cites this paper
• Chapter 15 - Kolmogorov complexity and the measures based on this complexity

  2017cites this paper
• Characterizing Complexity Changes in Chinese Stock Markets by Permutation Entropy

  2017cites this paper
• Entropy and Efficiency of the ETF Market

  2016cites this paper
• Financial Market Efficiency Should be Gauged in Relative Rather than Absolute Terms

  2015influential citation
• On the Tsallis Entropy For Gibbs Random Fields

  2014cites this paper
• Algorithmic Complexity of Financial Motions

  2014influential citation
• Novel measures based on the Kolmogorov complexity for use in complex system behavior studies and time series analysis

  2013cites this paper
• Multi-Scale Approximate Entropy Analysis of Foreign Exchange Markets Efficiency

  2012cites this paper
• A Relative Efficiency Measure Based on Stock Market Index Data

  2012cites this paper
• A partisan effect in the efficiency of the US stock market

  2012cites this paper
• Entropy analysis in foreign exchange markets and economic crisis

  2012cites this paper
• Application of Permutation Entropy and Statistical Complexity Measure in Crude Oil Price Time Series

  2012cites this paper
• Algorithmic complexity theory detects decreases in the relative efficiency of stock markets in the aftermath of the 2008 financial crisis

  2011influential citation
• Complexity-entropy causality plane: A useful approach to quantify the stock market inefficiency

  2010cites this paper
• Efficiency of financial markets and algorithmic complexity

  2010cites this paper
• According to their Relative Efficiency

  2009cites this paper
• The dynamics of exchange rate time series and the chaos game

  2009cites this paper
• Ranking the stocks listed on Bovespa according to their relative efficiency

  2009influential citation
• Market efficiency in foreign exchange markets

  2006cites this paper