I’m reading Justin Fox’s The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, which is on many “To Read” lists because of its topical relevance. I think it is especially illuminating when examined in light of another work, Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith. As made clear by the title Fox’s stance is generally skeptical of the efficient-market hypothesis (though Fox does often distinguish between weak and strong forms of the hypothesis, and is naturally not as hostile to the former as the latter). In contrast, Smith’s work was written right after the .com boom in the early 2000s, and though it is not particularly explicit about its theoretical presuppositions, he clearly believes that the efficient-market hypothesis is the culmination of a century of Wall Street insight. The two books basically take the same history, and flesh out the same figures, but toward fundamentally different ends in terms of big-picture insight (reading Just Fox’s book I started having flashback’s to Smith’s narrative because the chronology forces a similar sequence to both works). There’s no point in reading “both sides” when it comes to many natural sciences, but when it comes to financial history I do think you learn a lot more with this sort of binocular inspection.
Addendum: Benoit Mandelbrot’s The Misbehavior of Markets: A Fractal View of Financial Turbulence is also very interesting, though naturally somewhat narrower focus.
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