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Learning From the Global Financial CrisisCreatively, Reliably, and Sustainably$
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Paul Shrivastava and Matt Statler

Print publication date: 2012

Print ISBN-13: 9780804770095

Published to Stanford Scholarship Online: June 2013

DOI: 10.11126/stanford/9780804770095.001.0001

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PRINTED FROM STANFORD SCHOLARSHIP ONLINE (www.stanford.universitypressscholarship.com). (c) Copyright Stanford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in SSO for personal use.date: 17 April 2021

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

(p.260) 15 The Normative Foundation of Finance
Learning From the Global Financial Crisis

Andreas Georg Scherer

Emilio Marti

Stanford University Press

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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