Posted April 8th, 2010
Phil Maymin, Assistant Professor of Finance and Risk Engineering. Watch his TEDxNSIT talk below.
Phil Maymin, Polytechnic Institute of NYU assistant professor of finance and risk engineering presented “The Nature of Genius, Trading, and Hindsight” via webcast at TEDxNSIT, a TEDx conference held at Netaji Subhas Institute of Technology in New Delhi on March 31.
TEDx events are independently organized talks created in the spirit of the widely popular TED conferences where prominent, contemporary thinkers share “ideas worth spreading.”
Professor Maymin discussed the idea that “genius is not about verifying, it is about finding or searching.”
His talk was based on his paper “Markets are Efficient if and only if P = NP” which applies one of the greatest questions in theoretical computer science, does P = NP?, to one of the greatest questions in finance: are markets efficient?
He concludes, in his talk and in his paper, that: “If markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be solved in polynomial time.”
He also proves the converse by showing “how we can ‘program’ the market to solve NP-complete problems. Since P probably does not equal NP, markets are probably not efficient. Specifically, markets become increasingly inefficient as the time series lengthens or becomes more frequent.”
We caught up with Professor Maymin after his talk to learn more. “According to polls and surveys, most finance academics believe markets are efficient, while most computer scientists believe P does not equal NP,” he said. “Based on my results, one of those groups must be wrong.”
He explains: “Either markets are inefficient, meaning there will always exist money-making opportunities if you just look hard enough, or P does in fact equal NP, meaning it is just as easy to compute a solution as it is to check one; in other words, it is just as easy to be a genius as it is to recognize one in hindsight."