The Rate of Market Efficiency [estado "Revise and Resubmit en el Journal of Finance] Articles uri icon

publication date

  • October 2014

International Standard Serial Number (ISSN)

  • 0022-1082

Electronic International Standard Serial Number (EISSN)

  • 1540-6261


  • We define two measures: the Model Performance Ratio (MPR), which ranks asset pricing models based on their ability to price random portfolios, and the Rate of Market Efficiency (RME), which measures market efficiency assuming the best pricing model (largest MPR). We find that: (i) market efficiency has almost doubled in the last four decades; (ii) the CAPM is the best performing model among five linear factor specifications. The first result is in sharp contrast with the evolution of thinking about market efficiency and the rise of behavioral finance; the second, casts serious doubts on the Fama and French paradigm.


  • market efficiency; meh; fama-french; pricing anomalies; momentum