Efficient markets, fundamentals, and crashes: American theories of financial crisis and market volatility

A comparison is made of the models and methods used by representative authors who have sought to address the swings in stock prices. The rather terse comparison between the orthodox theorists and those labeled heterodox demonstrates the wide divergence between the foci of approaches adopted. Their methods, conclusions, and implications differ markedly. Where the orthodox approaches focus all but exclusively on statistical issues, the heterodox group stresses the importance of incomplete information and markets in an institutional and historical context. Such fundamental differences prohibit any meaningful dialogue between proponents of the two basic approaches. Moreover, substantial deficiencies of contributions within the two groups limit ability to discriminate between rival views within each group.