Are financial markets efficient? Phase transition in the aggregation of information

Johannes Berg; Matteo Marsili; Aldo Rustichini; Riccardo Zecchina

doi:10.1002/cplx.10065

Are financial markets efficient? Phase transition in the aggregation of information

Johannes Berg, Matteo Marsili, Aldo Rustichini, Riccardo Zecchina

Economics (Twin Cities)

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

Financial markets can be considered as collective information processing devices, which aggregate the information on relevant events into market prices. We show that, in a simple model, markets are efficient aggregators of information only if the number of traders is sufficiently large compared to the number of relevant events. The transition to an efficient market occurs through a phase transition, well known from critical phenomena in physics.

Original language	English (US)
Pages (from-to)	20-23
Number of pages	4
Journal	Complexity
Volume	8
Issue number	2
DOIs	https://doi.org/10.1002/cplx.10065
State	Published - Nov 2002

Keywords

Agent-based models
Complex systems
Disordered systems
Financial markets
Phase transitions

Publisher link

10.1002/cplx.10065

Find It

Find It at U of M Libraries

Cite this

@article{5b2f4a63c5a745848d00f33cbb8f2753,

title = "Are financial markets efficient? Phase transition in the aggregation of information",

abstract = "Financial markets can be considered as collective information processing devices, which aggregate the information on relevant events into market prices. We show that, in a simple model, markets are efficient aggregators of information only if the number of traders is sufficiently large compared to the number of relevant events. The transition to an efficient market occurs through a phase transition, well known from critical phenomena in physics.",

keywords = "Agent-based models, Complex systems, Disordered systems, Financial markets, Phase transitions",

author = "Johannes Berg and Matteo Marsili and Aldo Rustichini and Riccardo Zecchina",

year = "2002",

month = nov,

doi = "10.1002/cplx.10065",

language = "English (US)",

volume = "8",

pages = "20--23",

journal = "Complexity",

issn = "1076-2787",

publisher = "John Wiley and Sons Inc.",

number = "2",

}

TY - JOUR

T1 - Are financial markets efficient? Phase transition in the aggregation of information

AU - Berg, Johannes

AU - Marsili, Matteo

AU - Rustichini, Aldo

AU - Zecchina, Riccardo

PY - 2002/11

Y1 - 2002/11

N2 - Financial markets can be considered as collective information processing devices, which aggregate the information on relevant events into market prices. We show that, in a simple model, markets are efficient aggregators of information only if the number of traders is sufficiently large compared to the number of relevant events. The transition to an efficient market occurs through a phase transition, well known from critical phenomena in physics.

AB - Financial markets can be considered as collective information processing devices, which aggregate the information on relevant events into market prices. We show that, in a simple model, markets are efficient aggregators of information only if the number of traders is sufficiently large compared to the number of relevant events. The transition to an efficient market occurs through a phase transition, well known from critical phenomena in physics.

KW - Agent-based models

KW - Complex systems

KW - Disordered systems

KW - Financial markets

KW - Phase transitions

UR - http://www.scopus.com/inward/record.url?scp=24644452888&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=24644452888&partnerID=8YFLogxK

U2 - 10.1002/cplx.10065

DO - 10.1002/cplx.10065

M3 - Article

AN - SCOPUS:24644452888

SN - 1076-2787

VL - 8

SP - 20

EP - 23

JO - Complexity

JF - Complexity

IS - 2

ER -

Are financial markets efficient? Phase transition in the aggregation of information

Abstract

Keywords

Publisher link

Find It

Other files and links

Fingerprint

Cite this