Mandelbrot, Fama and the emergence of econophysics

Boris Salazar ()

Revista Cuadernos de Economia, 2016, vol. 35, issue 69, 637-662

Abstract: It is argued that Mandelbrot’s stable Lévy-Pareto distributions were not accepted into the emerging field of financial economics due to their incompatibility with the analytical techniques and properties of equilibrium economics, and to the absence —both in physics and in economics— of analytical solutions to the infinite variance associated with those distributions. Whilst physicists made stable Lévy distributions plausible, creating Econophysics in the meantime, economists just forgot about them, suggesting their strong bias towards desirable properties and against established facts. ****** Se argumenta que las distribuciones Lévy-Pareto estables de Mandelbrot no se aceptaron en el campo emergente de la economía financiera debido a su incompatibilidad con las técnicas y propiedades analíticas de la economía de equilibrio, y a la ausencia —tanto en la física como en la economía— de soluciones analíticas para la varianza infinita asociada con aquellas distribuciones. Si bien los físicos hicieron posibles las distribuciones Lévy estables, creando entretanto la econofísica, los economistas simplemente las olvidaron, sugiriendo su fuerte sesgo hacia las propiedades deseables y en contra de los hechos establecidos.

Keywords: Efficient markets hypothesis; Mandelbrot; Fama; stable Lévy-Paretodistributions; Gaussian distribution; Kuhn; Lakatos; methodology. (search for similar items in EconPapers)
JEL-codes: B30 B40 G14 (search for similar items in EconPapers)
Date: 2016
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