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The Relativistic-Chaotic Market Hypothesis: On the Physical Impossibility of Perfect Informational Efficiency

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  • PETROV, VALENTIN

Abstract

This paper introduces the Relativistic-Chaotic Market Hypothesis (RCMH), a theoretical framework extending traditional financial theory to account for the fundamental constraints imposed by both the finite speed of light and the emergence of chaos in relativistic market systems. While the Efficient Market Hypothesis (EMH) assumes instantaneous information transmission, physical reality dictates that information cannot propagate faster than light speed, creating unavoidable information asymmetries across spatially distributed markets. Furthermore, the cascading interactions of these light-cone-bounded information flows generate inherently chaotic dynamics that fundamentally limit predictability and efficiency. We develop a formal model quantifying how the combination of relativistic constraints and emergent chaos bounds the theoretical maximum efficiency achievable in any market system, proving that perfect informational efficiency is not merely practically challenging but physically impossible. Using principles from special relativity and chaos theory, we establish mathematical relationships between spatial market distribution, information value decay rates, and the inevitability of chaotic market behavior. Through a series of thought experiments involving hypothetical interplanetary market scenarios, we demonstrate how relativistic-chaotic effects would create persistent arbitrage opportunities and unpredictability that cannot be eliminated through technological advancement or regulatory intervention. Our framework reconciles certain empirical market anomalies with theory by demonstrating that efficiency gaps and apparently random market fluctuations are not necessarily market failures but may reflect fundamental consequences of physical law. The RCMH has significant implications for market design, regulatory approaches, and the future of interplanetary finance as human economic activity expands throughout the solar system. We propose a modified definition of market efficiency that accounts for both relativistic constraints and chaotic emergence while preserving the core insights of the EMH, bridging the divide between theoretical finance and physical reality.

Suggested Citation

  • Petrov, Valentin, 2025. "The Relativistic-Chaotic Market Hypothesis: On the Physical Impossibility of Perfect Informational Efficiency," MPRA Paper 123835, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:123835
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    File URL: https://mpra.ub.uni-muenchen.de/123835/1/MPRA_paper_123835.pdf
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    More about this item

    Keywords

    Market efficiency; special relativity; information theory; arbitrage; chaos theory; deterministic chaos; emergent complexity; high-frequency trading; financial physics;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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