JUDGING by the behaviour of the stock market, we are living in challenging times for mainstream finance. Under the hypothesis that markets are efficient and investors are rational, neoclassical theory assumes away the problem of financial bubbles and the linkages between equity returns and the rest of the macro variables. After a decade of unconventional monetary policies, massive fiscal deficits, and the return of inflation, however, equity market behaviour in recent years has been nothing short of perplexing, leaving most practitioners struggling to understand the vagaries of stock markets. Today, the workhorse neoclassical model requires a thorough review of its assumptions (and conclusions)....
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