As arbitrage opportunities dried up, traders imported academic theory wholesale

Evidence

By 1986, realizing the need for greater sophistication in order to keep ahead of his competitors, Meriwether had developed “a pronounced game plan to interact with academia,” indeed to “evolve into a quasi-university environment” (Meriwether interview). He sent Salomon employees to visit universities and to attend the conferences of the American Finance Association. — Donald MacKenzie, An Engine, Not a Camera, 968

Categorization

• XREF: Connects to the performativity thesis: the pathway by which finance theory entered practice was not direct application but competitive necessity once easy arbitrage vanished. — connects to: Market crashes drove practitioners to adopt academic beta research. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 365; Finance theorists moved fluidly between academia and market practice — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1096; Market microstructure shapes whether arbitrage opportunities persist or vanish — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 94

Broader Connections

• Market microstructure shapes whether arbitrage opportunities persist or vanish #qualifies (0.72) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 94