References (33)



Markets are Efficient if and Only if P = NP

Philip Maymin

NYU Poly - Department of Finance and Risk Engineering

February 28, 2011

Algorithmic Finance, Vol. 1, No. 1, 2011
NYU Poly Research Paper

I prove that if markets are 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.

Number of Pages in PDF File: 12

Keywords: algorithmic finance, efficiency, complexity, computation, P, NP

Accepted Paper Series

Download This Paper

Date posted: March 1, 2011  

Suggested Citation

Maymin, Philip, Markets are Efficient if and Only if P = NP (February 28, 2011). Algorithmic Finance, Vol. 1, No. 1, 2011; NYU Poly Research Paper. Available at SSRN: http://ssrn.com/abstract=1773169

Contact Information

Philip Maymin (Contact Author)
NYU Poly - Department of Finance and Risk Engineering ( email )
Brooklyn, NY 11201
United States

Feedback to SSRN

Paper statistics
Abstract Views: 46,541
Downloads: 5,268
Download Rank: 680
References:  33
People who downloaded this paper also downloaded:
1. Anomalies and Market Efficiency
By G. William Schwert

Paper comments
No comments have been made on this paper

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.297 seconds