Geopolitical and Institutional Constraints on Adaptive Market Efficiency: A Feasibility Diagnostic for Robust Portfolio Construction

Battle Count: 67

The paper is relevant to quantitative portfolio construction as a feasibility diagnostic layer, particularly for practitioners using ranking-based, equal-weighted, or constraint-aware methods. It addresses WHERE adaptive efficiency plausibly holds rather than HOW to construct portfolios. However, it is explicitly non-predictive, does not generate trading signals, does not propose a new factor or alpha, and does not involve any computational model or algorithm for trade execution. Its utility is as a pre-screening or universe-conditioning tool rather than a direct trading strategy component. Relevance is moderate — useful for robustness-oriented quant practitioners but not for signal-driven or ML-based trading systems.

The GAER formula itself is straightforward (a weighted concentration ratio). However, practical implementation requires: (1) sourcing and normalizing geopolitical embedding indicators (G) and institutional quality proxies (I) for each asset, which involves judgment and data integration from multiple sources (World Bank WGI, IMF, BIS, etc.); (2) defining the core subset threshold; (3) handling cross-jurisdictional comparability; (4) updating indicators over time. The mathematical computation is trivial, but the data engineering and indicator construction are non-trivial and subjective. No code is provided.

The paper states all components are algorithmically defined and a reference implementation requires only total-return prices, basic liquidity measures, and optional fundamental data. However, the illustrative GAER values are constructed from publicly available information and qualitative approximations, not calibrated estimates. The G and I indicators involve measurement choices and proxy selection sensitivity. No code repository or dataset is provided. The core subset definition (top 75% cumulative market cap) is specified but left intentionally flexible.