## Market efficiency

Markets are efficient to the extent that all information is built into the current prices. The weak form of market efficiency requires that the latest price already incorporates all the information which can be obtained from the chart of past prices and trading volumes. Clearly, if markets were efficient at least in this weak sense, returns would be totally independent over time and strategies based on technical analysis, neural networks and the logoptimal portfolio theory would be completely worthless, see *Hull (2009)*, *Model of the behavior of stock prices*.

However, the efficiency of a given market is purely an empirical question. You can never be sure that asset returns in the real world are really completely independent in time. Therefore, you should not take market efficiency as a fact but you are encouraged to test it on your own by inventing and implementing new technically inspired strategies. If your strategy calibrated on past trading data proves to be robust enough...