Market pricing regimes shift with historical events, not gradual efficiency gains

Evidence

The volatility skew thus reveals the historicity of economics, at least of the particular form of economics examined here. The U.S. markets priced options one way before 1987 and have priced them differently since, and the change was driven by a historical event: the 1987 crash. — Donald MacKenzie, An Engine, Not a Camera, 151

Categorization

• SEED: Angle: markets themselves are historical artifacts that regime-change via events, challenging the efficient-market gradualist story.
• XREF: connects to: The Black-Scholes model gained market traction slowly, not through instant self-fulfilling prophecy. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 111; Unscheduled events also punctuate market flow and refocus global attention — Karin Knorr Cetina & Urs Bruegger, Global Microstructures: The Virtual…, 97; Market actions based on efficient-market models can create anomalies those models cannot explain — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1166 (+2 more)

Broader Connections

• Historical change arrives as a qualitative leap, not gradual growth #expands (0.80)
• Market actions based on efficient-market models can create anomalies those models cannot explain #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 1166