Paper: arXiv 2601.05924

Authors: Roberto Garrone

Abstract

This paper develops a structural framework for characterizing the informational feasibility of financial markets under heterogeneous institutional and geopolitical conditions. Departing from the assumption of uniform and time-invariant market efficiency, adaptive efficiency is conceptualized as a localized and state-dependent property emerging from the interaction between economic scale, institutional enforcement, and geopolitical embedding. To operationalize this perspective, the paper introduces the Geopolitical-Adaptive Efficiency Ratio (GAER), a descriptive cross-sectional indicator measuring the concentration of adaptive-efficiency-supporting mass within institutionally and geopolitically central assets. GAER is not a return-predictive signal, factor, or regime classifier. Instead, it functions as a diagnostic boundary condition, delimiting the domain in which ranking-based and robustness-oriented portfolio construction methods are plausibly applicable. The framework integrates insights from adaptive market theory, institutional economics, and political economy, linking disclosure continuity, liquidity provision, and enforcement credibility to the persistence of informational signals in asset prices. GAER is formalized, its theoretical properties are discussed, and its interpretation is illustrated using a global equity snapshot based on publicly observable information. The contribution separates informational feasibility from portfolio construction and execution, providing a conceptual foundation for constraint-aware financial modeling without reliance on forecast-driven assumptions or parametric optimization.

Complexity vs Empirical Score

  • Math Complexity: 3.5/10
  • Empirical Rigor: 3.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper presents an interesting conceptual framework integrating political economy and adaptive market theory into portfolio feasibility diagnostics, but it is heavily theoretical with limited empirical validation or rigorous backtesting in the provided text. The mathematical formulation is lightweight, relying primarily on descriptive definitions rather than deep technical derivations.

Research Flowchart

  flowchart TD
    A["Research Goal: Assess Portfolio Feasibility Under Geopolitical & Institutional Constraints"] --> B["Data Inputs: Public Global Equity Snapshot, Institutional & Geopolitical Metrics"]
    B --> C["Core Synthesis: Merge Adaptive Market Theory, Institutional Economics & Political Economy"]
    C --> D["Construct Diagnostic Tool: Compute Geopolitical-Adaptive Efficiency Ratio (GAER)"]
    D --> E["Boundary Condition Analysis: Delimit Applicable Domain for Ranking & Robust Portfolios"]
    E --> F["Key Outcome: Non-Predictive Diagnostic Separating Informational Feasibility from Execution"]