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Working with the Wrong Tools

  • Morten Arisson
Chapter

Abstract

Since the 1870s, six innovations have developed and shaped what we know today as Theory of Finance. They are also the basis of fundamental investing fallacies. These are the use of differential analysis, the use of general equilibrium theory, the use of probability theory, the (corruption of the) concept of liquidity, the misunderstanding of sovereign risk and, lastly, systemic risk. All six fallacies are discussed in this chapter.

Keywords

Differential analysis General equilibrium theory Probability theory Liquidity Sovereign risk Sovereign default Systemic risk Contagion Correlation Ponzi scheme Fractional reserve banking Shadow banking ETF Exchange-traded fund Clearinghouse High-frequency trading HFT Basel III Lebac Argentina Modern Portfolio Theory MPT Beta Infinitesimal analysis Indeterminacy 

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Morten Arisson
    • 1
  1. 1.Credit Portfolio ManagerTorontoCanada

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