Market Efficiency or Behavioral Finance: The Nature of the Debate

Abstract

Academic finance (also known as financial economics) espouses a methodology that has been largely discredited (or, at the very least, challenged) in all other disciplines, not to mention the philosophy of science itself. And this methodology is so ingrained that it is rarely even addressed, let alone seriously debated. The term behavioral finance, which ought to be applied to a different, more experimental methodological approach to finance, is instead applied to a set of papers that make slightly different assumptions in their mathematics/statistics without even using different methods.