Algorithmic Complexity Theory and the Relative Efficiency of Financial Markets

Ricardo Giglio, Federal University of Santa Catarina
Raul Matsushita, University of Brasilia
Annibal Figueiredo, University of Brasilia
Iram Gleria, Federal University of Alagoas
Sergio Da Silva, Federal University of Santa Catarina

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.