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Theorizing Efficient Markets: A Sociology of Financial Ideas

Published online by Cambridge University Press:  30 April 2015

Simone Polillo
Simone Polillo*
Affiliation:
University of Virginia, Charlottesville [Sp4ft@virginia.edu].
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Abstract

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.

Résumé

Cet article étudie l'économie financière pour montrer de quelle manière une idée innovante peut donner forme à un agenda de recherche. Il s'intéresse en particulier aux raisons pour lesquelles l'hypothèse de l'efficience des marchés financiers, cristallisée dans les travaux de Eugene Fama, est devenue centrale pour l'économie financière, au contraire du modèle d'évaluation des actifs financiers, pourtant défendu entre autres par Fischer Black. L'auteur attire en particulier l'attention sur les différences entre ces modèles du point de vue de leurs réseaux de diffusion (cohésion, cohérence) mais également du point de vue de leurs référents méthodologiques. L'utilisation par Fama des techniques de data mining et des statistiques fréquentistes accroît la cohérence de son cercle intellectuel, transformant l'analyse de l'efficience en un projet collectif orienté vers la découvertes de propriétés objectives. À l'inverse, le fait que Black adopte des méthodes plus subjectives tend à exacerber les tendances individualistes de son approche et de son réseau, augmentant par là-même le degré d'incohérence de son groupe de recherche.

Zusammenfassung

Dieser Beitrag über die Finanzwirtschaft untersucht, inwieweit eine innovative Idee zu einem neuen Forschungskalender führen kann. Er hinterfragt, wie die Effizienzhypothese der Finanzmärkte, in Eugene Famas Forschung exzerpiert, zu einem zentralen Element der Finanzwirtschaft werden konnte, im Gegensatz zum Evaluierungsmodell der Finanzaktiva, das u.a. von Fischer Black verteidigt worden ist. Der Autor interessiert sich insbesondere für die Unterschiede zwischen diesen Modellen, sowohl aus Sicht der Verbreitung (Kohäsion und Kohärenz), als auch aus Sicht ihrer methodologischen Referenten. Famas Rückgriff auf Data Mining Techniken und Statistiken der Frequenz erhöht die Kohärenz seines intellektuellen Kreises, mit Umwandlung der Effizienzanalyse in ein kollektives Projekt zwecks Darstellung objektiver Eigenschaften. Blacks subjektivere Methoden führen zur Verstärkung sowohl der individualistischen Tendenzen seines Ansatzes und Netzes, als auch des Inkohärenzgrades seiner Forschungsgruppe.

Keywords

Financial economicsCultural productionSocial networksEconomies financièresProduction culturelleRéseaux sociauxFinanzwirtschaftKulturproduktionSoziale Netzwerke
Type
Economic Culture in the Public Sphere
Information
European Journal of Sociology / Archives Européennes de Sociologie , Volume 56 , Issue 1: Economic Culture in the Public Sphere , April 2015 , pp. 11 - 37
Copyright
Copyright © A.E.S. 2015 

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