Financial markets, efficiency and adaptation

Abstract

This article introduces the concept of adaptation in order to understand the efficiency in financial markets. Some previous theories evidence the need and relevance of adaptive analysis as a response to the traditional paradigm focusing on views of the Efficient Markets Hypothesis (EMH). In particular, two criticisms of EMH are presented: one based on the rationality of the agent, showing the impossibility of informationally efficient markets, and the other based on behavioral economics, focused on the heterogeneity of agents and their limited rationality. Finally, the adaptive markets hypothesis is presented as an alternative to understand the behavior of agents in the market.