General Equilibrium: Arbitrage and Information
Adopting 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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- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- 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.
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