Does Adam Smiths Invisible Hand Work for Financial Markets: Comments

Amaresh Das

Authors

Amaresh Das

Keywords:

the pair correlation function, the lognormal distribution, the exponential distribution, the central limit theorem

Abstract

Adam Smith theory of the Invisible Hand is fundamentally flawed. The neoclassical theory based on it relies on market models in which economic agents interact with the market forces that are not governed by Universal Law of Nature; such models ignore correlations that lead to booms and depressions. To prove rigorous theorems financial economists also assume that market fluctuations follow a certain statistical distribution a la a thermodynamic equilibrium approach. Do they really score a major breakthrough? No -the dominant 'equilibrium principle' of the market is only a hope, not a reality: It lacks proper empirical underpinning. Statistics and mathematics do not help.

Downloads

How to Cite

Does Adam Smiths Invisible Hand Work for Financial Markets: Comments. (2015). Global Journal of Management and Business Research, 15(2), 31-36. https://journalofbusiness.org/index.php/GJMBR/article/view/

Download Citation

Author Biography

Amaresh Das

Dr. Amaresh Das is an academic researcher affiliated with Southern University at New Orleans and the University of New Orleans. His work spans econometrics, financial time series analysis, and mathematical finance, with notable contributions including studies on Markov switching heteroscedasticity, Kalman filtering, and the Chebyshev inequality. With 35 publications and over 60 citations, his research has been recognized with an h-index of 5 and an i10-index of 2. Dr. Das's scholarly output reflects a deep engagement with both theoretical and applied aspects of economics and finance.

References

Eric Beinhocker (2006) The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics.

Brock Hommes, C. (1997) Models of Complexity in Economics and Finance,System Dynamics in Economics and Financial Models ed. 3-44.

H. Casimir (1995) On the Onsager's Principle of Macroscopic Reversibility. 17(2-3), 343-350. https://doi.org/10.1103/revmodphys.17.343

Amaresh Das (2013) Is Financial Theory so Different from Statistics and Thermodynamics: Comment.

De Bondt, Werner, Richard Thaler (1985) Does the Stock Market Overreact?. 793-805.

P. Degranwe, H. Dewachter, M. Embrechts (1993) Exchange Rate Theory: Chaotic Models of Foreign Exchange Market, Blackwell, Oxford.

Eugene Fama, Kenneth French (2007) Disagreement, tastes, and asset prices. 83(3), 667-689. https://doi.org/10.1016/j.jfineco.2006.01.003

Kozhikade, IIM (2013) Econophysics: Research in India in the Last Decade. 2(2), 135-146.

Ama Nagurney (2002) Financial Equilibrium.

Carl Rasmussen, Christopher Williams (2006) Gaussian Processes for Machine Learning. https://doi.org/10.7551/mitpress/3206.001.0001

Robert Sells, Richard Weidner (1980) Elementary Modern Physics, Boston: Allyn and Bacon.

D. Smith, Duncan Foley (2002) Is Utility Theory So Different From Thermodynamics?. 02.