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Informational Efficiency and Information Subsets
Author(s) -
LATHAM MARK
Publication year - 1986
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1986.tb04490.x
Subject(s) - efficient market hypothesis , set (abstract data type) , property (philosophy) , computer science , market efficiency , efficient algorithm , mathematical economics , microeconomics , economics , econometrics , financial economics , algorithm , epistemology , paleontology , philosophy , horse , stock market , biology , programming language
This paper proposes a new definition of the Efficient Markets Hypothesis with respect to information, which is more formal and precise than those of Rubinstein [13], Fama [4], Jensen [6], and Beaver [1], and which fits well as a framework for interpreting the many tests of the Efficient Markets Hypothesis in the literature. Security markets are here considered “efficient with respect to information set ϕ ” if and only if revealing ϕ to all agents would change neither equilibrium prices nor portfolios. In addition to other desirable features, this definition has the “subset property”: efficiency with respect to ϕ implies efficiency with respect to any subset of ϕ .