Issue
EPL
Volume 84, Number 4, November 2008
Article Number 48005
Number of page(s) 6
Section Interdisciplinary Physics and Related Areas of Science and Technology
DOI http://dx.doi.org/10.1209/0295-5075/84/48005
Published online 21 November 2008
EPL, 84 (2008) 48005
DOI: 10.1209/0295-5075/84/48005

Algorithmic complexity theory and the relative efficiency of financial markets

R. Giglio1, R. Matsushita2, A. Figueiredo3, I. Gleria4 and S. Da Silva1

1   Department of Economics, Federal University of Santa Catarina - 88049970 Florianopolis SC, Brazil
2   Department of Statistics, University of Brasilia - 70910900 Brasilia DF, Brazil
3   Institute of Physics, University of Brasilia - 70910900 Brasilia DF, Brazil
4   Institute of Physics, Federal University of Alagoas - 57072970 Maceio AL, Brazil

iram@pq.cnpq.br

received 8 April 2008; accepted in final form 16 October 2008; published November 2008
published online 21 November 2008

Abstract
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.

PACS
89.65.Gh - Economics; econophysics, financial markets, business and management.
89.20.-a - Interdisciplinary applications of physics.

© EPLA 2008