On the Perils of Security Pricing by Financial Intermediaries: The Case of Open-End Mutual Funds

There are many instances where financial claims trade at prices set by intermediaries. Pricing by an intermediary introduces the potential for economic distortions from innumerable sources. As one example, we show that nonsynchronous-trading generates predictable, readily exploitable, changes in mutual fund-share prices (NAV). The exploitation of predictable changes in mutual fund NAVs involved a wealth transfer from buy-and-hold fund investors to active fund traders and is costly to all fund investors. A simple modification to the mutual fund pricing algorithm eliminates much of this predictability, but nonsynchronous trading is just one of the issues intermediaries face when setting prices.

A philosophical analysis of the evidence-based medicine debate

BACKGROUND: The term "evidence-based medicine" (or EBM) was introduced about ten years ago, and there has been considerable debate about the value of EBM. However, this debate has sometimes been obscured by a lack of conceptual clarity concerning the nature and status of EBM. DISCUSSION: First, we note that EBM proponents have obscured the current debate by defining EBM in an overly broad, indeed almost vacuous, manner; we offer a clearer account of EBM and its relation to the alternative approaches to medicine. Second, while EBM proponents commonly cite the philosophical work of Thomas Kuhn and claim that EBM is a Kuhnian 'paradigm shift,' we argue that such claims are seriously mistaken and unduly polarize the EBM debate. Third, we suggest that it is much more fruitful to understand the relationship between EBM and its alternatives in light of a different philosophical metaphor: W.V. Quine's metaphor of the web of belief. Seen in this way, we argue that EBM is an approach to medical practice that is indeed importantly different from the alternatives. SUMMARY: We can have a more productive debate about the value of EBM by being clearer about the nature of EBM and its relationship to alternative approaches to medicine