Theorizing Efficient Markets

A Sociology of Financial Ideas

Dados Bibliográficos

ID4180747
AutoresSimone Polillo (0000-0002-7873-7075, University of Virginia, autor correspondente)
Ano2015
Volume56
Fascículo1
Páginas11-37
Data de publicação2015-04-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoEuropean Journal of Sociology (JOURNAL)
Identificadores do periódicoISSN: 0003-9756 • E-ISSN: 1474-0583
EditoraCambridge University Press (CUP) (PUBLISHER)
DOI10.1017/s0003975615000028
OpenAlexW2148070541
IdiomaEN
Citações recebidas2
Referências citadas71

In this paper, I use the case of financial economics to show how an innovative idea can shape a research agenda. I focus on why the efficient-market hypothesis, crystallized in Eugene Fama's research, acquired core theoretical status in the discipline of financial economics, whereas the Capital Asset Pricing Model, championed by, among others, Fischer Black, did not. I draw attention both to differences in the networks propagating these models, in particular differences in cohesion and coherence, and to differences in the methodologies underlying the models. I argue that Fama's use of "data-dredging" techniques and frequentist statistics increased the coherence of the intellectual circle around him, turning the analysis of efficiency into a collective project oriented towards the discovery of objective properties. By contrast, Black's adoption of more subjectivist methods exacerbated the individualistic tendencies of his approach and his network, increasing the incoherence of his research group

Bayesian inference · Bayesian probability · Coherence (philosophical gambling strategy) · Economics · Efficient-market hypothesis · Epistemology · Financial economics · Financial market · Frequentist inference · Neoclassical economics · Positive economics · Sociology · Stock market · Subjectivism · Complex Systems and Time Series Analysis · Computer Science · Economic Theory and Institutions · Finance · Financial Markets and Investment Strategies