Vlog: "Gestalt Switch"?

Take a look at the picture below. What animal do you see?

Source: Rabbit–duck illusion Wikipedia

Philosophers of science such as Kuhn (1962) and Feyerabend (1975) call the shift from duck to rabbit (and vice versa) as "gestalt switch." The drastic change of perspectives spells trouble for scientific progress. The crux is that competing research programs interpret the available facts in entirely different, incompatible ways based on their different yardsticks of scientific success (the incommensurability problem). 

The prior literature in asset pricing has largely perceived anomalies as indicating dysfunctional capital markets as a result of systematic investor mistakes and trading frictions (that prevent these mistakes from being eliminated). In contrast, my body of work has viewed anomalies as indicating well-functioning capital markets as a result of the net present value rule in capital budgeting on the part of managers. The change in perspective seems like a "gestalt switch."

Back in the picture above, the animal cannot be a duck and a rabbit simultaneously. "Dubbit" doesn't exist. The real world is more ambiguous, though one can still ask the question which one of the two perspectives outlined above offers a more accurate description of capital markets in reality. Time will tell.

The presentation below delves into the "gestalt switch" based on Liu, Whited, and Zhang (2009, Journal of Political Economy, "Investment-based Expected Stock Returns," see also article and slides):

The latest word on GMMing investment returns is in Goncalves, Xue, and Zhang (2020, Review of Financial Studies, "Aggregation, Capital Heterogeneity, and the Investment CAPM," see article, slides, and the presentation below):