“Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as favorable games, in the sense that there is a small probabilistic edge that smart speculators can exploit. We propose to identify this probability using conditional entropy concept. A perfect random walk has this entropy maximized, and departure from the maximal value represents a price history's predictability. We propose that market participants should be divided into two categories: producers and speculators. The former provides the negative entropy into the price, upon which the latter feed. We show that the residual negative entropy can never be arbitraged away: infinite arbitrage capital is needed to make the price a perfect random walk.”

“In 1995, Eugene Stanley coined the phrase ‘econophysics’ at a meeting in India. At about the same time, Yi-Cheng Zhang and his group introduced the econophysics webpage: unifr.ch/econophysics. Simon Capelin at Cambridge University Press led the charge by publishing Stanley’s and other econophysics books. His program there is still strong. Sadly, econophysics, like nonlinear dynamics, was never recognized by the APS as part of physics. American physics prefers (nonfalsifiable) string theory to falsifiable approaches to social problems. My university offers one of the only econophysics PhD programs in the world.”

— Joseph McCauley (2008), “Emergence of Finance Theory and Econophysics” [16]