The ideology of finance-part II: "From unrealistic assumptions to realistic theories?: positive financial economics as a catch-22"

Official URL: https://dx.doi.org/10.4324/9781315188911

In this paper we argue that a positivist methodology cannot result in paradigms that are consistent with the notion of search for the truth, supposedly, the ultimate goal science. We use the capital asset pricing model as an example to demonstrate our contention. On the other hand, we also argue that the positivist methodology was conducive to the creation of the volume of research in financial economics that has been produced over the last four decades. We conclude that if the prime objective of science is discovery, then we must look for an alternative methodology.