Homogeneity bias

This chapter discusses a concept from introductory financial economics courses (i.e., the benefit of diversification) to show that the methodology of mainstream financial economics ignores it (i.e., such methodology lacks diversification). That is, although financial economists teach this concept in their introductory financial economics courses, the methodology that they employ in their research ignores that same concept, i.e., it is under-diversified, and consequently, the knowledge that is generated is biased towards under-diversification, or homogeneity. This chapter suggests a multi-paradigmatic approach as a way to overcome such under-diversification, or homogeneity, bias. This chapter shows that in the same way that an investor in financial markets benefits from diversification in investment, a researcher benefits from diversification in research, i.e., a multi-paradigmatic research. To this end, this chapter first discusses the benefit of diversification in the context of financial markets, and then it discusses the benefit of diversification in the context of financial research.