A new look at financial markets efficiency from linear response theory

Finance Research Letters, Volume 51, January 2023

Antonio M.PuertasaJoaquimClara-RaholabMiguel A.Sánchez-GranerocF. Javierde las NievesaJuan E.Trinidad-Segoviad

Departamento de Química y Física, Universidad de Almería, 04120 Almería, Spain
KHN Capital Consulting SL, C/Mestre Francesc Civil 8, 17005 Girona, Spain
Departamento de Matemáticas, Universidad de Almería, 04120 Almería, Spain
Departamento de Economía y Empresa, Universidad de Almería, 04120 Almería, Spain

Received 27 July 2022, Revised 18 October 2022, Accepted 31 October 2022, Available online 7 November 2022, Version of Record 16 November 2022.


In this paper we propose a new measure of market efficiency based on the average response of a market price after a market event by using Linear Response Theory. It is shown that the average response to an event in different markets agrees fairly well with this theory’s prediction from equilibrium data in absence of external forces or events. In this work it is first found that Linear Response efficiently resolves price dynamics at moderately perturbed financial markets of different types. Namely we study Forex markets, the S&P500 index, Commodities markets and the Bitcoin-US dollar one. Furthermore, we determine a measure of market inefficiency, which can be used to compare the inefficiency between different assets and securities.