III · Market theory
Station III of The Quant Map: how markets can work in principle. Efficiency as the null, event time, long memory, Ito. Reading order plus the free map PDF.
how markets can work in principle, efficiency is the null hypothesis
Events arrive in bursts. Volatility clusters. A liquidity shock can rewire correlations inside an afternoon. Clock time treats those as evenly spaced samples, and a lot of the structure lives in the waiting time, the path between prints, and the shape of the book of correlations. The articles here are frontier reading: they assume you already know what a null is, what a feature is, and what a cost line is. Read them cold and you collect vocabulary. Vocabulary does not size a position.
Theory is the station where you decide what would count as structure at all. Efficiency is the null: the burden of proof sits on the rule, and a random-looking path can still pay a premium for a risk. The frontier pieces here are optional until the rest of the spine is standing.
The Quant Map PDF works this spine through example research: five full descents from observation to live rule, and a library of 835 strategy entries, each with a named payer and a named failure mode. Get the free PDF on the Start Here page.
Reading order
Top to bottom. Stop at the first article you cannot apply to a live trade; that is the one to read slowly.
| Article | Why it is on this row |
|---|---|
| Market Data Is Social Data: From Fractals to Topological Data Analysis | The cross-section has a shape. Persistent homology is one way to measure when that shape tears. |
| The Omori Law: Why Aftershocks Follow Market Crashes | After a crash the intensity of large moves decays in a way you can fit. The clock for that decay is event time. |
| Long-Range Dependence: Real Memory or Just Short-Range Echo? | A slow autocorrelation can be real memory or a short-memory process with a break. The distinction changes the forecast. |
| Markets Are Getting More Random: Non-Stationarity of Randomness Itself | The amount of structure is a time series. A rule fit to a structured decade meets a noisier one. |
| Itô Calculus, Intuitively | The continuous-time account of how volatility enters the P&L. The drift you think you have and the drift you compound are different objects. |
| Random Walk and Efficient Markets Are Not the Same Thing | A random-looking path can still pay a premium. Efficiency is the null you have to beat. |
On the map: ← II · Market architecture · The grand map · IV · Edge mechanisms →