History Of Financial Economics Research Articles

Efficient Markets Hypothesis: A False Prophesy. Black-Scholes-Merton Formula: A Parlor Trick. Risk-Neutral Pricing Models: Severe Malpractices.

In this notes, I argue and show that the so-called Efficient Markets Hypothesis (EMH) is no less than a false prophecy, the Black-Scholes-Merton (BSM) formula - a perfect rendition of EMH - no more than a parlor trick, and risk-neutral pricing models - generalisations of BSM - severe malpractices. In the rich history of financial economics, there have been more critiques of EMH and BSM than one can find in textbooks; however one find no arguments more convincing than one good numerical illustration which I shall offer in this notes. Education is a very important part of the process through which social and intellectual values are instilled in younger generations. Through this notes, I hope to convey key messages to the community of non-economists and non-mathematicians, be they the humble citizens including my parents who have worked hard paying tax and sending their kids, students of financial economics and financial engineering, to schools not to earn decent education, but only to be brain-washed with false prophecies and armed with dangerous tricks. This notes, in a certain way, is more than 'financial economics and finanical engineering for dummies'.

The Emergence of Econophysics: A New Approach in Modern Financial Theory

Financial economics and mathematical finance are the two traditional scientific disciplines that constitute modern financial theory. Although they still largely dominate modern financial theory, in the past few years a new “player” has increasingly been making itself felt and could lead to a rethinking of some of the theoretical foundations of modern financial theory. This new player is econophysics. Econophysics is a very recent movement that is beginning to interest increasing numbers of financial practitioners. To date, no history of econophysics has been produced. This article aims at filling this gap. It analyzes the theoretical foundations of econophysics and their connections with the history of financial economics. It also explores the reasons underlying the emergence of econophysics and explains how econophysics has become the third component of modern financial theory.

Bachelier: Not the Forgotten Forerunner He Has Been Depicted As. An Analysis of the Dissemination of Louis Bachelier’s Work in Economics

This article presents the results of new research on the history of financial economics by analyzing the dissemination of Louis Bachelier’s work. Louis Bachelier is doubtless the best known French mathematician in the history of modern finance theory. While recent studies have given us a fairly complete picture of the man himself, his work and the results he arrived at, knowledge of his contribution to the development of ideas remains imprecise. Although the direct influence of his work is analyzed on occasion, no study has assessed the dissemination of Bachelier’s work, and hence its impact on all scientific disciplines. This is precisely the purpose of this article: to examine the dissemination of Bachelier’s work in order to better assess his impact on the development of financial economics . Based on a bibliometric analysis of Bachelier’s work, this study aims at shedding light on his influence and explaining how the idea of his “rediscovery” in the 1950s gained credence. This article demonstrates that, contrary to the widely accepted view, Bachelier’s work has never been forgotten; it also shows that the discovery of Bachelier’s work by economists has had no significant influence on the development of financial economics.

Bachelier: Not the forgotten forerunner he has been depicted as.An analysis of the dissemination of Louis Bachelier's work in economics

This article presents the results of new research on the history of financial economics by analysing the dissemination of Louis Bachelier's work. Louis Bachelier is doubtless the best known French mathematician in the history of modern finance theory. While recent studies have given us a fairly complete picture of the man himself, his work and the results he arrived at, knowledge of his contribution to the development of ideas remains imprecise. Although the direct influence of his work is analysed on occasion, no study has assessed the dissemination of Bachelier's work, and hence its impact on all scientific disciplines. This is precisely the purpose of this article: to examine the dissemination of Bachelier's work in order to better assess his impact on the development of financial economics (Jovanovic (2010) makes a similar analysis of the dissemination of Bachelier's work in mathematics). Based on a bibliometric analysis of Bachelier's work, this study aims at shedding light on his influence and explaining how the idea of his ‘rediscovery’ in the 1950s gained credence. This article demonstrates that, contrary to the widely accepted view, Bachelier's work has never been forgotten; it also shows that the discovery of Bachelier's work by economists has had no significant influence on the development of financial economics.

The Tree of Financial Economics

The aim of this note is to outline the historical evolution of the theoretical tools invented by financial economists and to highlight the academic contribution to financial practice. The framework is as follows: Section 2 reviews some of the findings reported by Mark Rubinstein (University of California at Berkeley) in his book on the history of financial economics; Section 3 studies the historical paths of financial theory and practice; Section 4 concludes.

The double emergence of the Modified Internal Rate of Return: The neglected financial work of Duvillard (1755 – 1832) in a comparative perspective*

This article aims at enhancing current understanding of the history of investment evaluation criteria based on discounting. Their emergence constitutes a challenging issue for scholars devoted to the history of financial economics, as well as to fundamental tools of economic analysis. Their history is analysed in a comparative perspective, starting with the neglected contribution of Duvillard as a reference case. More than two centuries ago, this French language scholar developed, by an optimizing analytical machinery, a financial measure technically similar to Modified Internal Rate of Return (MIRR). In order to assess his theoretical contribution in a comparative perspective, the author will try to briefly account for the different contexts where the financial measure has been invented twice. This approach, indeed, is concerned with the institutional changes and the theoretical developments they fostered. It analyses concepts such as time preference, techniques such as discounting and issues such as the ‘reinvestment problem’. On the one hand, the Past (especially around the eighteenth century) and Duvillard's contribution is explored. On the other hand, the Present is reconstructed (in particular the late Fifties and later), especially the recent debate that re-invented the MIRR. This article will conclude with some comparative results.