K. Ilinski: Key results in financial economics

How to reconcile Technical Analysis and Market Efficiency in case of non-equilibrium markets

It is common to consider independence of future prices from previous historical prices as a feature of market efficiency. This is only true if one assumes infinitely fast market reaction, i.e. in the limit of equilibrium market. In the case of non-equilibrium market dynamics there is a time delay between changing factors and market response which brings price dependence (Technical Analysis). This is correct in almost any practical application.

Kirill Ilinski, Chapter 7, “Physics of Finance”, John Wiley & Sons 2001 and

Alexandra Ilinskaia and Kirill Ilinski, “How to reconcile Market Efficiency and Technical Analysis”, cond-mat/9902044 (February 1999)

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