Testing the Efficient-Market Hypothesis at different frequencies using the information theory

What is it about?

I use entropy measures from the information theory to gauge the predictability of stock returns at different frequencies, thus indirectly testing the Efficient-Market Hypothesis at different time scales. I show that the efficiency of the market does not hold at high frequencies.

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Why is it important?

First, I show that the Efficient-Market Hypothesis does not hold at high frequencies. I also show that price formation processes exhibit a completely opposite information-theoretic characteristic to white noise, calling into question methods in finance based on Brownian motion or Lévy processes.