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No, they haven't. That said, economists have lots of delusions about markets (and i point them out), but to be fair, their rationality claim is usually about ef
by DannyBee 3y ago
No, they haven't.
That said, economists have lots of delusions about markets (and i point them out), but to be fair, their rationality claim is usually about efficiency, rather than some form of more general rationality.
IE rationality is things like "excess pricing opportunities are rare and go away quickly"
rather than
rationality is "people do generally sane things"
- fnordpiglet 3y agoYes, that’s what I mean by consistency. Put call parity will generally exist because it’s consistent with expected behavior, otherwise market participants will capture the inefficient pricing and bring it back to consistency. Here I mean the market has some structure and relationships between instruments and in so far as prices are consistent with the structure of the market and it’s instruments they’re “efficient,” or perhaps rational. But I think when people say “is the current marker rational or is it exuberant?” they don’t mean consistent / efficient, they mean “aligned with fundamentals in a way that makes rational sense to an economist.”