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A Modern Approach to the Efficient-Market Hypothesis

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  • Gabriel Frahm

Abstract

Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information flow including the evolution of asset prices. By contrast, No Weak Arbitrage together with market sensitivity is sufficient and necessary for a market to be informationally efficient.

Suggested Citation

  • Gabriel Frahm, 2013. "A Modern Approach to the Efficient-Market Hypothesis," Papers 1302.3001, arXiv.org, revised Mar 2014.
    • Handle: RePEc:arx:papers:1302.3001
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    References listed on IDEAS

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    1. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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