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Economists' Hubris: The Case of Asset Pricing

Shahin Shojai

Ernst & Young LLP

George Feiger

Contango Capital Advisors

September 7, 2009

Journal of Financial Transformation, Vol. 27, pp. 9-13, December 2009

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 5 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.

Number of Pages in PDF File: 5

Keywords: Asset pricing, market efficiency, applied finance, behavioral finance, behavioral economics

JEL Classification: G12, G13, G14, D03

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Date posted: September 7, 2009 ; Last revised: October 5, 2009

Suggested Citation

Shojai, Shahin and Feiger, George, Economists' Hubris: The Case of Asset Pricing (September 7, 2009). Journal of Financial Transformation, Vol. 27, pp. 9-13, December 2009. Available at SSRN: http://ssrn.com/abstract=1469462

Contact Information

Shahin Shojai (Contact Author)
Ernst & Young LLP ( email )
One More London Place
London, London SE1 2AF
United Kingdom
George Feiger
Contango Capital Advisors ( email )
111 Sutter Street, Suite 975
San Francisco, CA 94104
United States
415-677-6700 (Phone)
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