The Normative Foundation of Finance
The Normative Foundation of Finance
How Misunderstanding the Role of Financial Theories Distorts the Way We Think About the Responsibility of Financial Economists
This chapter presents a critique of how financial economists have misunderstood the role of financial models and abdicated their intellectual responsibilities. It draws on the philosophy of science to clarify these responsibilities to include critical reflections on the problems of practice and ties theories to practical problems. In pursuing the widely adopted, largely abstract efficient market hypothesis, based on unrealistic assumptions, this chapter argues that financial economists have largely neglected this responsibility.
Keywords: financial economists, financial models, market hypothesis
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