Finance theorists moved fluidly between academia and market practice

Evidence

Financial economics was never simply an academic endeavor, and putting finance theory to practical use was seen as entirely legitimate. The interweaving of innovation in financial economics and developments in the financial markets meant that, despite the hostility of many in the markets to finance theory, attractive consultancies were available from the 1960s on. Before long, there were tempting job opportunities in the finance sector. In 1984, for example, Fischer Black resigned his professorship at MIT’s Sloan School of Management for a post at Goldman Sachs, where he remained until his death in 1995. In 1990, Scholes became a consultant to Salomon Brothers, and later he became joint head of the group at Salomon that traded and sold bond derivatives, though he also maintained an academic attachment to Stanford University. — Donald MacKenzie, An Engine, Not a Camera, 1096

Categorization

• XREF: Direct evidence for the thesis’s central claim that models shape markets via involvement of theorists in practice, not just passive description. — connects to: Postwar finance scholarship shifted its gaze from the corporation to the market — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 328; Finance theory developed cumulatively like a technological cascade from Markowitz to trading room practice — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1090; The finance theory cascade advanced through both published texts and personal contact between researchers — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1092 (+4 more)

Broader Connections

• As arbitrage opportunities dried up, traders imported academic theory wholesale #exemplifies (0.82) — Donald MacKenzie, An Engine, Not a Camera, 968
• Finance theory shapes markets through the linguistic infrastructure it provides practitioners #expands (0.78) — Donald MacKenzie, An Engine, Not a Camera, 1128