Who Wins: Yoda or Sith? A Proof that Financial Markets Are Seldom Efficient

  • Lucian Daniel Stanciu-ViziteuEmail author
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 669)


We propose an artificial financial market where three types of investors compete. Value investors, that use information to align the asset’s price with it’s value are called YODA. SITH is our name for the investors who hold information but decide not to use it right away, and instead act as non-informed investors. All other agents trade without information. We show that SITH agents can make better risk-adjusted gains than YODA agents. Consequently we prove that informed investors have incentives to withhold information and act like chartist traders. Our observations lead us to state that financial markets are consistently overpricing assets and can be regarded as seldom efficient.


Market Price Financial Market Risk Premium Trading Period Price Bubble 
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Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  1. 1.CERAG UMR CNRS 5820University of GrenobleGrenobleFrance

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