The Department of Finance and Risk Engineering welcomes Ed Weinberger, Adjunct Professor, NYU Tandon FRE, to the BQE Lecture Series.
Pragmatic Information and Market Efficiency
"Standard," information theory says nothing about the semantic content of information. Nevertheless, financial markets demand consideration of precisely this aspect of information, yet the search for a suitable measure of an "amount of meaning" has been, up until now, largely unsuccessful. This talk represents an attempt to move beyond this impasse, based on the observation that the meaning of a message can only be understood relative to its receiver. Positing that the semantic value of information is its usefulness in making an informed decision, I define pragmatic information as the information gain in the probability distributions of the receiver's actions, both before and after receipt of a message in some predefined ensemble. The efficient market hypothesis (EMH) is then the statement that the pragmatic information of available information (previous prices, news items, etc.) in predicting future prices from zero. I contrast this version of the EMH with the more familiar claim that price processes are martingales by observing that the familiar GARCH(1, 1) process, though a martingale, violates the present version of the EMH.
Ed began his post Ph.D. career as a researcher in theoretical evolutionary biology at the University of Pennsylvania and the Max Planck Institute, but he transferred his skills in applied math to quantitative finance when he became a quant on the interest rate desk of HSBC. Upon joining Deutsche Bank, Ed became interested in financial risk management, where he helped establish GARP’s Financial Risk Manager (FRM) exam. Since then, he has since consulted on a number of projects in quantitative finance and financial technology (“fintech”), including his ongoing fintech work at Bank of America. Besides being a long time adjunct in what is now Tandon’s Department of Finance and Risk Engineering (FRE), Ed was a visiting professor of finance at Clark University from 2014-2016.
Ed currently teaches numerical methods and Python programming in the FRE Department.