On the theory and practice of finance

Abstract

The purpose of this paper is to provide an explanation for the way the reality in the world of finance comes to be formed, among other things, by the theory of finance. It is based on the idea that financial behavior is not independent of the theory of finance. The paper, therefore, examines certain aspects of the academic field of finance. That is, it examines theories, PhD programs, journals, and conferences in academic finance. It notes that they adhere, almost exclusively, to a certain worldview, called the functionalist paradigm. Then, the paper discusses the role of finance graduates as employees of universities, corporations, and financial institutions in the practice of finance. In this way, the paper provides an explanation for the social construction of the world of finance.