Beta persisted in market language even where practitioners misunderstood its technical meaning

Evidence

Investment analysts might sometimes not have understood “beta” as Sharpe had intended. They often took beta to be a direct measure of a stock’s individual riskiness rather than a measure of a stock’s covariance with the overall market, and thus of the stock’s contribution to the overall risk of a diversified portfolio. Nevertheless, “beta” became a lasting feature of how sophisticated practitioners talked, and still talk, about financial markets. — Donald MacKenzie, An Engine, Not a Camera, 1129

Categorization

• XREF: The gap between textbook meaning and practitioner use echoes the earlier discussion of Black-Scholes being misapplied yet remaining culturally permanent; also parallels how ‘efficient’ carries ordinary connotations foreign to its technical definition. — connects to: The discovery-then-acceptance narrative misdescribes how financial economics shaped markets — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 386; Finance theory shapes markets through the linguistic infrastructure it provides practitioners — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1128

Broader Connections

• Finance theory shapes markets through the linguistic infrastructure it provides practitioners #expands (0.82) — Donald MacKenzie, An Engine, Not a Camera, 1128
• The discovery-then-acceptance narrative misdescribes how financial economics shaped markets #exemplifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 386