In teaching finance theories, we should emphasize the structure of hypotheses, especially the highly sought-after economic rationale. While in some cases well-confirmed empirical generalizations without an economic rationale are sufficient as testable hypotheses, we typically require reasonableness or plausibility of hypotheses which is the assessment of prior probabilities about the characteristics of hypotheses (Salmon 1963). Such discussion would lay the foundation for better understanding of empirical testing of the theory.