Markets are efficient if and only if P=NP

Philip Maymin ()
Additional contact information
Philip Maymin: NYU-Polytechnic Institute, NY, USA

Algorithmic Finance, 2011, vol. 1, issue 1, 1-11

Abstract: 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.

JEL-codes: C02 C15 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (4)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:iosalg:0001

Access Statistics for this article

Algorithmic Finance is currently edited by Phil Maymin

More articles in Algorithmic Finance from IOS Press
Bibliographic data for series maintained by Saskia van Wijngaarden ().