The randomness of price changes was a foundational open problem in finance

Evidence

Beyond the anomalies (and earlier than them in its emergence) lay another kind of problem for efficient-market theory a problem that seems technical but is deep in its ramifications. If changes in security prices were in some sense “random,” how was that randomness to be characterized mathematically? Was it a “mild” randomness that could be treated by standard statistical techniques, or a “wild” randomness not susceptible to those techniques? — Donald MacKenzie, An Engine, Not a Camera, 463

Categorization

• DEFINE: Introduces the mild-versus-wild randomness distinction that structures the chapter’s treatment of how finance mathematics characterized price movement.
• XREF: connects to: CRSP error-detection relied on the independence of monthly price changes. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 113; Random-walk ideas of security prices predate the 1950s by a century — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 257; Random-walk prices and market efficiency transformed US finance in the 1950s-60s — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 256 (+2 more)

Broader Connections

• Practical statistical convenience, not empirical fit, drove finance’s retention of the normal distribution #expands (0.80) — Donald MacKenzie, An Engine, Not a Camera, 510