On the performative power of financial models

Financial models vary according to their ability to shape markets. This ability depends on the way models are used in institutional settings. In contrast to the prevalent view that involvement in organizational practices almost automatically makes models performative, this paper argues that institutional design might obstruct potential model performativity. This crucial issue determines whether models are strongly or only 'generically' or 'effectively' performative. The empirical study of the usage of the discounted cash flow (DCF) model presented in this paper offers an example of an application practice that significantly limits the model's performative power.