Classical finance treats efficiency as an equilibrium: fixed, timeless, binary. This series takes that claim apart piece by piece — through martingale pricing, the limits of arbitrage, and the Adaptive Markets Hypothesis — and rebuilds it as something that evolves.
active · opened 2026-09-06
Martingale pricing, the Markov property, and geometric Brownian motion set up the constant-parameter assumption behind classical market efficiency. Fama's three-form taxonomy, the joint hypothesis problem, and Grossman-Stiglitz's limits on informational efficiency show why that assumption fails — and why Lo's Adaptive Markets Hypothesis replaces an equilibrium with an ecology.
published · 2026-09-06
Regime-switching models give Adaptive Dynamics a mathematical body — and expose that adaptation costs time, not just structure.
coming soon
The empirical arbitration between EMH and AMH: does narrative saturation lead the regime detector, closing the lag Part 2 identified as structural?
coming soon