The big, bad wolf and the rational market: portfolio insurance, the 1987 crash and the performativity of economics

By Donald MacKenzie. 2004

287 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/bf1a8b825953c76fbf7a68b93dcdda938556e5cf

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Opening the black boxes of global finance (2005, background): “Historically, many financial transactions have been enacted with voices, hand signals and handshakes alone, and some still are (see MacKenzie, 2004a).”
Securitising Suburbia: The Transformation of Anglo-American Mortgage Finance (2006, background): “While practitioners, financiers-turned-authors, and social scientists offer a diverse range of interpretations of the development of MBS, their explanations remain highly problematic when viewed from the perspective provided by approaches to finance that take their conceptual inspiration from Foucau”
Financialised Capitalism: Crisis and Financial Expropriation (2009, methodology): “Penetrating sociological analysis of this process has been provided in a series of papers by MacKenzie 2003, 2004, for instance, and MacKenzie and Millo 2003.”
Geographies of circulation and exchange: constructions of markets (2009, methodology): “Starting from his famous study of the BlackScholes-Merton model on option-pricing and how it transformed and recreated the derivatives market (MacKenzie and Millo, 2003; MacKenzie, 2007), MacKenzie later extended his work towards other examples and finally set out a general synopsis of his ideas aro”
What Does It Mean to Say That Economics Is Performative? (2006, background): “The 16 “Sunshine trading […] could be seen as an attempt to repair the Black-Scholes world, to create a world in which the mere placing of 'informationless' orders did not affect prices” (MacKenzie 2004, p.323).”
Computer Algorithms, Market Manipulation and the Institutionalization of High Frequency Trading (2016, background): “Also, ANT-inspired scholars such as MacKenzie (2003, 2004, 2006) studied the performative role of technology and pricing models in ﬁnance.”
From performativity to political economy: index investing, ETFs and asset manager capitalism (2016, background): “…using the term ‘overflowing’ to denote the permeability of the frame and the ‘impossibility of total framing’ (Callon 1998a: 18).9 It is this inevitable incompleteness of performative processes that leads to the phenomenon for which MacKenzie (2004) coined the term ‘counterperformativity’.”
Sub-prime mortgage lending: a cultural economy (2008, background): “In Froud et al.’s (2006) terms, addressing infelicity and the ‘counterperformativity’ (MacKenzie, 2004) of market models and devices creates potential for an explicitly cultural political economy that concentrates on the ‘discrepancy between promise and outcome’ (p. 73; also Erturk et al., 2007).”
The economics of animal health and production. (2008, background): “The dangers of over-reliance on economic optimization techniques are all too evident in the history of the financial markets of the world (MacKenzie, 2004).”
Is Economics Performative? Option Theory and the Construction of Derivatives Markets (2006, background): “…article, however, examines ways in which classic option theory became “less true” after the 1987 stock market crash, and briefly points to the possibility (discussed in more detail in MacKenzie 2004) that a practical application of the theory—so-called “portfolio insurance”—exacerbated the crash.”
Markets, market-making and marketing (2007, background): “…performativity has been adopted by sociologists, in particular those who have studied the operation of financial markets (Knorr-Cetina and Bruegger, 2002; MacKenzie, 2001, 2003, 2004; MacKenzie and Millo, 2003) following earlier studies of the social structures of market traders (Abolafia, 1996).”
Take an issue: cultural economy and finance (2007, background): “…the appropriate set of meanings from the socio-technical agencement to maximize, as far as possible, an understanding of what’s at stake and what judgements are required to keep the market positions and exposures assembled in forms that do not spell disaster (see, for example, MacKenzie 2004b: 94).”
An Introduction to Market Devices (2007, background): “…Hopwood and Miller, 1994; Miller and Rose, 1990; Power, 1996), that have studied the performative capacities of economic knowledge (Callon, 1998; MacKenzie, 2003, 2004, 2006; MacKenzie, Muniesa and Siu, 2007; Fourcade, 2007; Kjellberg and Helgesson, 2006), that have analysed networks of…”
CALCULATING ECONOMIC LIFE (2008, background): “…an object of sociological interest in the past two decades, and on both sides of the Atlantic (Abolafia 1996; Amin & Thrift 2004; Callon 1998; DiMaggio 2001; Fligstein 1990, 2001; Granovetter 1985; Kalthoff 2005; Mackenzie 1996, 2003, 2004, 2006; Miller 1994a; Porter 1995; Smelser & Swedberg 2005).”