Surely, unrealistic assumptions about rationality were the biggest factors leading to the crash - the Fed ignored all the hazards because it would be "irrational" for anyone to make a mistake.
Quants are mostly not big believers in rationality. They use it sometimes ("all other things being equal, the market is probably about right"), but if they didn't think people were making mistakes they would be trying to make money off those mistakes.
Quants are mostly not big believers in rationality. They use it sometimes ("all other things being equal, the market is probably about right"), but if they didn't think people were making mistakes they would be trying to make money off those mistakes.