The Theory of Fair Markets (TFM) toward a new finance paradigm
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AbstractIn this paper I offer the Theory of Fair Markets (TFM) as an alternative to the ubiquitous CAPM/EMH that has been ruling unabated academia's financial economics for the last four decades. According to the TFM what counts is whether society is better off with a market system which is carefully monitored and corrected by a democratically elected government and social, labor, and other laws that serve as its infrastructure than with the notion of laissez faire. Admittedly, the theory is in its infancy and as such it is subject to both evolutionary changes/modification and exploratory empirical research. Without a doubt, it is also subject to criticism. Nevertheless, I contend that the EMH should be scrutinized and abandoned, because it is a reality-retardant theory, falsely implying Pareto optimality.

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