Modern Financial Market Theory – A Critique Based on the Logic of Human Action

Modern Financial Market Theory – A Critique Based on the Logic of Human Action

The modern financial market theory (MFMT) – based on the efficient market hypothesis, rational expectation theory, and modern portfolio theory – has become the standard approach in financial market economics. In this article, the MFMT will be critically ­reviewed using the logic of human action (or:...

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Veröffentlicht in:Credit and capital markets (Berlin) 2021, Vol.54 (3), p.447-467
1. Verfasser: Polleit, Thorsten
Format: Artikel
Sprache:eng
Schlagworte:
Austrian Economics
Capital Asset Pricing Model
Capital assets
Capital markets
Decision making
Economic Methodology
Economics
Efficient Market Hypothesis
Efficient markets
Epistemology
Financial market
Hypotheses
Investments
Logic
Logic of human action
Modern Portfolio Theory
Preferences
Rational Expectation Theory
Scientific method
Securities markets
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Beschreibung
Zusammenfassung:The modern financial market theory (MFMT) – based on the efficient market hypothesis, rational expectation theory, and modern portfolio theory – has become the standard approach in financial market economics. In this article, the MFMT will be critically ­reviewed using the logic of human action (or: praxeology) as an epistemological meta­theory. It will be shown that the MFMT exhibits (praxeo-)logical deficiencies so that it cannot provide investors with well-founded decision-making support in real-world financial markets.
ISSN:2199-1235
2199-1227
2199-1235
DOI:10.3790/ccm.54.3.447