The Emergence of Modern Financial Economics

  • Alessandro VercelliEmail author


The author argues that the evolution of the financial system and the contemporaneous co-evolution of financial economics exerted a deep mutual influence on each other. After WWII, this branch of economics slowly acquired the status of autonomous sub-discipline having its own rigorous paradigmatic hallmarks (Modern Financial Economics), and assumed a growing influence on both macroeconomics and the real world. The new approach to financial issues provided a sanguine view of financial firms, markets, and institutions appealing to mainstream researchers for its analytic potential, policy makers for its support to the emerging neoliberal views, and practitioners for its operational approach that encouraged and justified an exponential growth of financial trade. The author discusses strength and shortcomings of the main building blocks of Modern Financial Economics focusing in particular on the foundational role of the Efficient Market Hypothesis (EMH). The concluding remarks investigate why the alignment between the model predictions and markets behaviour discernible in tranquil times broke down in times of financial turmoil.


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© The Author(s) 2019

Authors and Affiliations

  1. 1.University of SienaSienaItaly

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