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

Thorsten Polleit ()
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Thorsten Polleit: University of Bayreuth, Universitätsstraße 30, 95440 Bayreuth

Credit and Capital Markets, 2021, vol. 54, issue 3, 447-467

Abstract: 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.

JEL-codes: B4 B41 E3 G1 G11 G14 G41 (search for similar items in EconPapers)
Date: 2021
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Handle: RePEc:kuk:journl:v:54:y:2021:i:3:p:447-467