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Pragmatic Information Rates, Generalizations Of The Kelly Criterion, And Financial Market Efficiency

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Executive Summary

This paper is part of an ongoing investigation of "Pragmatic information," defined in Weinberger (2002) as "The amount of information actually used in making a decision." Because a study of information rates led to the Noiseless and Noisy Coding Theorems, two of the most important results of Shannon's theory, the authors begin the paper by defining a pragmatic information rate, showing that all of the relevant limits make sense, and interpreting them as the improvement in compression obtained from using the correct distribution of transmitted symbols.

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