The neoclassical approach to finance rests on a series of tacit assumptions about social institutions. Financial valuation is intrinsically uncertain, since there is no way of knowing how large the prospective yield of an asset will be. Objectively calculable risk is shown to depend on what is called the probabilistic postulate, which makes it possible to preserve the objectivity of value and avoid the problem of collective belief. The claim that economic behavior can be coordinated solely on the basis of parametric rationality here assumes the form of fundamentalist rationality, from which it follows that competition in financial products is self-regulating. The efficient markets hypothesis is examined, and three approaches to the phenomenon of efficiency distinguished. The idea that the value of a security is independent of the opinion of investors is rejected with reference to the treatment of radical uncertainty by Knight and Keynes.
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