The Network Adaptive Market Hypothesis: Detection, Attribution, and Network-Mediated Efficiency

Abstract

We propose the Network Adaptive Market Hypothesis (NAMH), a novel extension of the adaptive markets framework that conceptualizes market efficiency as a network-dependent equilibrium emerging from long-memory predictability and cross-market information transmission. Using G20 equity indices and five commodity futures over 2001-2026, we identify Japan as the central information hub, while the United States primarily acts as an information broadcaster. Contrary to conventional expectations, systemic crises do not exhibit higher network spectral radii, challenging the assumption that crisis-related fragility necessarily manifests through increased network amplification. Instead, crisis-related spectral contributions are dominated by Australia and the United States. Importantly, variance-decomposition connectedness is more closely associated with network modularity than with spectral radius, with crisis-period increases driven primarily by cross-cluster spillovers. Notably, efficiency-based market groupings explain network connectedness only marginally compared with geography and asset class, while the middle efficiency tier consistently exhibits the greatest idiosyncratic behaviour.