CAPM shows no evidence of Barnesian performativity in pricing

Evidence

What is crucial from the viewpoint of Barnesian performativity is that the agreement between the Capital Asset Pricing Model and empirical data does not seem to have improved after the model was formulated. If anything, tests on later data suggested poorer agreement than the original tests, which were conducted using price series stretching back into the period before the Capital Asset Pricing Model was formulated. It is thus difficult to find in the econometric literature any persuasive evidence for the Barnesian performativity of the model. — Donald MacKenzie, An Engine, Not a Camera, 1147

Categorization

• DEEPTHINKING: The negative test of the core thesis: a model widely adopted by practitioners left no trace in the data it was supposed to bring into conformity — the strongest possible evidence against strong performativity.
• XREF: Connects to chapter 4’s discussion of CAPM testing and Roll’s critique; also to the broader performativity literature (Callon, MacKenzie’s own taxonomy). — connects to: Barnesian performativity means models create the price patterns they describe — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 148; CAPM adoption failed to improve the model’s fit to market data — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1147; Regulatory use of CAPM could generate model-compliant returns but remains untested empirically — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1150 (+1 more)

Broader Connections

• CAPM adoption failed to improve the model’s fit to market data #corroborates (0.90) — Donald MacKenzie, An Engine, Not a Camera, 1147
• Traders’ arbitrage activity made the pricing model appear empirically true #contradicts (0.85) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 126
• Regulatory use of CAPM could generate model-compliant returns but remains untested empirically #qualifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 1150