
Contents
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6 What is a financial market? Global markets as microinstitutional and post-traditional social forms
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Introduction Introduction
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The birth of modern financial theory: the role of economics and modern probability theory The birth of modern financial theory: the role of economics and modern probability theory
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The role of modern probability theory The role of modern probability theory
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The role of economics The role of economics
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The constitution of the dominant paradigm of financial economics during the 1960s and 1970s The constitution of the dominant paradigm of financial economics during the 1960s and 1970s
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Challenges to the dominant paradigm of financial economics: diversification of theoretical approaches Challenges to the dominant paradigm of financial economics: diversification of theoretical approaches
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The January Effect and the Weekend Effect The January Effect and the Weekend Effect
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The Winner's Curse The Winner's Curse
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Stock Price Volatility Stock Price Volatility
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The Size Effect The Size Effect
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Financial market microstructure Financial market microstructure
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Behavioral finance Behavioral finance
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Financial economics challenged by disciplines outside of economics: social studies of financial markets and econophysics Financial economics challenged by disciplines outside of economics: social studies of financial markets and econophysics
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Social studies of financial markets Social studies of financial markets
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Econophysics Econophysics
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Notes Notes
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References References
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28 Finance In Modern Economic Thought
Get accessFranck Jovanovic is Professor of Economics at TELUQ, Université du Québec à Montréal. His research deals with the history of financial economics, and, more recently, with econophysics and its links with financial economics. Among his most recent publications are “The Construction of the Canonical History of Financial Economics,” History of Political Economy (2008) and “The History of Econophysics’ Emergence: A New Approach in Modern Financial Theory” (with Christophe Schinckus), forthcoming in History of Political Economy (2013).
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Published:03 June 2013
Cite
Abstract
This article analyzes the place of modern finance in modern economic theories. It aims to show how economics has influenced, and continues to influence, modern financial theory. The article is organized as follows. The first part focuses on the theoretical foundations of modern financial theory. It analyzes the way modern probability theory and economics were linked together to create modern financial theory. The second part presents the key works of the dominant paradigm of financial economics, which was built during the 1960s and the 1970s. It shows how major concepts and hypotheses from economics were integrated into mathematical models. The third part looks at anomalies that have emerged since the end of the 1970s and are inconsistent with the dominant paradigm. The last part deals with two major approaches born outside financial economics — social studies of financial markets and econophysics — which are among the greatest challenges to the foundations of the dominant paradigm of financial economics today.
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