Practitioners knew market anomalies before academics documented them

Evidence

But although an explanation in terms of tax incentives might satisfy market practitioners, who knew of the turn-of-the-year effect’s existence, though apparently not of its concentration in small stocks, before academics identified it (Branch 1977), it was “ridiculous” from the viewpoint of efficient-market theory (Roll 1983, p. 20). Surely any effects of temporary sales pressures and purchase pressures would be minimized by arbitrageurs exploiting those effects. If the market was efficient, surely other investors not subject to turnof-the-year tax incentives would make use of the effect to earn excess returns. — Donald MacKenzie, An Engine, Not a Camera, 425

Categorization

• XREF: Echoes the performativity thesis’s interest in practitioners knowing markets tacitly; practitioners exploited the effect without formal theory. — connects to: Efficient-market theory undercut the professional credibility it seemingly supported. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 350; The discovery-then-acceptance narrative misdescribes how financial economics shaped markets — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 386; LTCM’s trades were largely familiar plays already identified by academics — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1028 (+1 more)
• SEED: Angle: the epistemic inversion where practitioners know and exploit market regularities before academic finance formalizes and names them.

Broader Connections

• The discovery-then-acceptance narrative misdescribes how financial economics shaped markets #corroborates (0.85) — Donald MacKenzie, An Engine, Not a Camera, 386