Keen Behavioural Finance 2011 Lecture 04 Actual Finance Markets Behaviour Part 2

Eugene Fama was an enthusiastic promoter of CAPM and the Efficient Markets Hypothesis, arguing that despite their absurd assumptions, the data supported the theories. But was this a fluke, the result of the narrow data range he used--from 1950 till 1966?

He has since disowned the theory in 2004, stating that "the theory has never been an empirical success", and that "most applications of the theory are invalid". But somehow these honest statements don't seem to have made it into the finance textbooks.

Category:

News & Politics

Tags:

• FInancial crisis
• Economic Crisis
• Stock Markets
• Market Crashes
• Efficient Markets Hypothesis
• CAPM
• EMH
• Fama and French
• Financial instability
• Steve Keen
• Hyman Minsky
• trading
• forex
• business
• stocks
• finance

[ProfSteveKeen]

Yes, I work with control theory engineers in Norway. I'm working on a computer program to develop an approach to this that suits economic modeling.

[KenMacMillan]

At the end of the Apollo 15 mission Commander David Scott dropped a feather & a hammer at the same time on the moon to show that they fall at the same time.

[Banten]

I especially find that the approaches used in control engineering should be very instructive to someone studying economics and finance, and vice versa.

Anyone interested should read about *control theory* on wikipedia, it's all about modeling complex systems with imperfect information about them -- and then trying to produce desired outcomes. Good fun :)

[Banten]

Strange that the profession of economics (present company excluded of course) has such different view of assumptions & data in relationship to the theories they derive from them -- quite different from what we use in engineering and the natural sciences.

As always, thanks for posting these lectures.