A Tale Between Finance and Economics: Four Essays on the History and Methodology of the Efficient Market Hypothesis

Abstract

Financial globalization is arguably the most important phenomenon in the economic history of the twentieth century. This thesis revisits the economic ideas that preceded and accompanied this transformation. Largely ignored or disparaged by economists at the beginning of the last century, finance gradually attracted more attention in the profession. This culminated, in the 1960s, in the emergence of the field of financial economics. This thesis contributes to the history of economic thought on financial markets (see, for example, Walter 1996; Mehrling 2005; and Jovanovic 2008) by discussing the evolution of such thought throughout the twentieth century. More precisely, I focus on North American economic thought, and, particularly, on the history and epistemology of one of its most central theories: the efficient market hypothesis. As it is broadly understood today, the efficient market hypothesis—associated with the work of Eugene Fama (1965, 1970)—claims that, in an efficient market, asset prices fully reflect all available information.