General Equilibrium: Arbitrage and Information
AbstractAdopting a non-probabilistic formulation of the Efficient Markets Hypothesis, this paper looks at its relationship to general equilibrium theory. Shannon's entropy allows us to show that arbitrage-free prices maximise the economy-wide amount of information, thereby bringing the two concepts together.
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Bibliographic InfoPaper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0701.
Date of creation: 2007
Date of revision:
arbitrage; entropy; information; efficient markets;
Find related papers by JEL classification:
- D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
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- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
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