If It Is Not Constructed As a ‘Market Completeness Metric,’ It Is Not a Market Completeness Metric

Abstract

In absence of metrics for assessing each of `incompleteness' properties of stock markets, and `completeness' properties of new issues of equity (combined, `market completeness, equivalently, incompleteness metrics (MIM)'), regardless of market efficiency and presence of fully rational agents, the probability of a positive stock market return is no greater than that of a pure chance event. In presence of MIM, while stock returns are not monotone increasing, they are strictly positive. Formal predictions do not find any evidence for proxies for MIM within stock markets, show none of market betas, return correlations etc. are substitutes for market incompleteness metrics.