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Economists’ hubris – the case of asset pricing

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Author Info

  • Shojai, Shahin

    ()
    (Capco)

  • Feiger, George

    ()
    (Contango Capital Advisors)

Abstract

This is the second in a series of articles that examines the practical applications of economic thought. Its focus is on the most fundamental aspects of finance theory, namely asset pricing. We discuss the major pricing models developed during the past five decades and critically examine their practical applications. Sadly, the results are not very encouraging. As with other academic economic disciplines, the gap between what is taught about the markets and what actually takes place is quite large, a gap in no way mitigated by the behavioralist arm of the subject. The seminal works of Sharpe and Lintner have provided us with a sound foundation upon which to build realistic pricing models, but unfortunately the unwavering acceptance of these models has resulted in research that merely cements their acceptance, discouraging an examination of how those pricing models could be adapted to suit the practical world.

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Bibliographic Info

Article provided by Capco Institute in its journal Journal of Financial Transformation.

Volume (Year): 27 (2009)
Issue (Month): ()
Pages: 9-13

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Handle: RePEc:ris:jofitr:1379

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Related research

Keywords: Asset pricing; behavioral finance; market efficiency;

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Cited by:
  1. Shojai, Shahin & Feiger, George, 2010. "Economists’ hubris – the case of risk management," Journal of Financial Transformation, Capco Institute, vol. 28, pages 27-35.
  2. Shojai, Shahin & Feiger, George, 2011. "Economists’ Hubris – The Case of Award Winning Finance Literature," Journal of Financial Transformation, Capco Institute, vol. 31, pages 9-17.
  3. Shojai, Shahin & Feiger, George & Kumar, Rajesh, 2010. "Economists’ hubris — the case of equity asset management," Journal of Financial Transformation, Capco Institute, vol. 29, pages 9-16.

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