The thesis is a philosophical analysis of the consumption based capital asset pricing model (CCAPM), investigating in particular its epistemological and methodological foundations. Financial markets are integral parts of advanced and developing economies. They matter because they channel unspent household income into banks’ savings accounts and assets such as bonds and stocks. Financial economists have traditionally taken interest in the pricing mechanism that underlies this capital allocation. The consumption based capital asset pricing model (CCAPM) is a prominent effort to describe, (...) explain and predict such prices. It tells a story of investors’ trade-off between consumption now and later and which portfolio of assets to hold. The CCAPM based narrative intuitively makes sense, and the chosen methodology involving theoretical assumption, mathematical models and empirical tests follows the professions’ standards of good scientific practise. But does CCAPM’s research programme provide knowledge for use? My thesis seeks to answer this question in a novel way. Instead of embarking on yet another asset pricing research project, I let Philosophy of Science inform my analysis. Following a “primer” introducing essential CCAPM topics and notations, I discuss, in turn, its theoretical foundation, mathematical model, and empirical test results from a philosophy of science perspective. I find that a few fundamental principles and several auxiliary assumptions combine to develop a simplified, partial and idealized theory of investors, financial markets and assets. The model reflects and represents this theory but also makes narrow claims that are distances away from the real situations they target. Unsurprisingly, ideal model assertions fail standard statistical tests of significance. I conclude that mathematical deductive modelling rooted in orthodox, a priori based fundamental principles create ideal and fictional settings that limit their scope and portability. The development of even more granular models within this orthodox paradigm that searches for “event regularities” will not render the desired knowledge for use. The real situations are possibly too complex to be captured in simplified assumptions, ideal theories and mathematical structures. Novel methodological and ontological approaches to asset pricing are in demand. Hence, claims about tendencies in the real data might replace the current focus on point-forecasts. (shrink)

This paper deals with calibration in scientific practices which investigate relatively well-understood natural phenomena by means of already standardized instrumental devices. Calibration is a crucial topic, since it conditions the reliability of instrumental procedures in science. Yet although important, calibration is a relatively neglected topic. We think more attention should be devoted to calibration. The paper attempts to take a step in this direction. The aims are two-fold: (1) to characterize calibration in a relatively simple kind of scientific practices; (2) (...) to provide conceptual and taxonomic tools of broader scope that help to get a better understanding of calibration in more complex cases and other kinds of scientific practices. For this purpose, we first provide indications for why a conceptual framework is needed. Second, a bibliographic survey of works dealing with calibration is attempted. Third, we introduce different tools to enable a better understanding of calibration. Fourth, we turn to the elaboration of what we call a “simple exemplar” of calibration, illustrated through the case of the calibration of an equal-arm balance. Fifth, the tools previously introduced, and the framework of the simple exemplar, are applied to a more complex case of calibration: calibration procedures in X-ray experiments. This serves to show the work accomplished by the simple exemplar and to emphasize features of more complex cases of calibration. Eventually, we revisit and specify the nature, status, scope and value of the proposed framework. (shrink)