EFF: I spoke with EconTalk host Russ Roberts about how the efficient market hypothesis relates to macroeconomic events of the past few years, with some additional thoughts on behavioral finance and the evolving nature of financial academic research.
Fama on EconTalk Podcast
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Financial Times Interview
EFF: Last week I was interviewed by James Mackintosh from the Financial Times. We discussed the relevance of market efficiency for investors, the definition of market "bubbles," and measurements of active manager outcomes. Watch the seven-minute interview here: Defending efficient markets (Financial Times).
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Distinguished Speaker Series: Eugene Fama and David Booth
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Fama: Is Warren Buffett Lucky or Skilled?
EFF: I spoke with Client Insights host Dan Richards about the importance of effectively communicating the risks associated with equity investing. Also, I discuss how Warren Buffett's success is more properly viewed in the context of business ownership than equity investment.
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Fama: Why Small and Value Stocks Outperform
EFF: I talked with Client Insights host Dan Richards about the problems with the Capital Asset Pricing Model (CAPM) and the development of the Fama/French three-factor model as a more accurate way of determining how average returns differ from one another. I also explain why higher expected returns for small and value stocks should persist.
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Fama: Do Active Managers Earn Their Fees?
EFF: In an interview with Client Insights host Dan Richards, I explain the key findings of the paper "Luck vs. Skill in Mutual Fund Performance" that Ken French and I published in 2010. Looking at funds over their entire lifetimes, only 3% demonstrate skill after accounting for their fees, and that's what you would expect purely based on chance. Even the active funds that have generated extraordinary returns are unlikely to do better than a low-cost passive fund in the future.
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Fama: The Best Advice I Ever Got
EFF: I shared with CNNMoney a piece of advice I received from a statistics professor that has guided my research for 50 years.
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Cochrane: Fama's Nobel Prize
John Cochrane explains Gene Fama's many contributions to finance. UPDATE, November 8: Professor Cochrane added to and refined his commentary on Gene's Efficient Markets work here.
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Congratulations, Gene
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Fama: What's a Bubble?
EFF:Â Robert Shiller and I talked with NPR about the definition of market "bubbles."
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Fama: Nobel Prize Talks podcast
EFF: In an interview for Nobel Media, Adam Smith and I spoke on many topics, including the pros and cons of having research debated in the public sphere and the unique research environment at Chicago. You can find the podcast here.
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Fama's Market
EFF: My undergraduate alma mater, Tufts University, features my life and academic career in their Winter 2014 magazine.
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Government Equity Capital for Financial Firms
By EUGENE F. FAMA The financial sector provides the grease that makes the transfer of savings to productive investments more efficient. This role is critical for the health of the economy. Government injections of equity capital into financial institutions can make sense if the whole financial system is in danger. But it is important that injections are at minimum cost to taxpayers, that is, without unnecessary subsidies. Problems on this score arise when the funds go primarily to prop up the value of a financial institution's existing debt. In this case the true amount of new equity capital is less than the injection of funds by the government, and the subsidy to debt holders is a loss to taxpayers with no clear offsetting benefits. My purpose here is to describe how this problem arises and how it can be avoided. (Read the full entry)
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Bailouts and Stimulus Plans
By EUGENE F. FAMA There is an identity in macroeconomics. It says that in any given year private investment must equal the sum of private savings, corporate savings (retained earnings), and government savings (the government surplus, which is more likely negative, that is, a deficit), PI = PS + CS + GS (1) In a global economy the quantities in the equation are global. This means the equation need not hold in a particular country, but it must hold in the world as a whole. For example, in recent years private investment in the US has been greater than the sum of private, corporate, and government savings in the US. This means the US has been importing savings from the rest of the world (by selling US securities to the rest of the world). But the equation always holds for the world as whole. (Read the full entry)
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Bailouts and Stimulus Plans - Addendum 1/16/09
By EUGENE F. FAMA There has been lots of response to my little essay on bailouts and stimulus plans. I will only comment on the negative ones that I think have merit and are overlooked in my original paper. First, however, I want to restate my argument in simple terms. 1. Bailouts and stimulus plans must be financed. 2. If the financing takes the form of additional government debt, the added debt displaces other uses of the funds. 3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses. Are any of these statements incorrect? (Read the full entry)
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Bailouts and Stimulus Plans - Addendum 1/28/09
By EUGENE F. FAMA In his NY Times blog Paul Krugman attacks my piece on the stimulus plan. Again, here is my argument in three sentences. 1. Bailouts and stimulus plans must be financed. 2. If the financing takes the form of additional government debt, the added debt displaces other uses of the same funds. 3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses. Are any of these statements incorrect? (Read the full entry)
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How Unusual Was the Stock Market of 2008?
By Eugene F. Fama and Kenneth R. French The cap-weighted market portfolio of NYSE-Amex-Nasdaq stocks delivered a -38.31% return for 2008. The experience was painful, but was it out of bounds? The volatility of returns also increased a lot during 2008. Was the observed volatility consistent with prior experience? These are the questions addressed here. (Read the full entry)
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Why Active Investing Is a Negative Sum Game
By Eugene F. Fama and Kenneth R. French William F. Sharpe has a great article in the January/February 1991 issue of The Financial Analysts Journal (Vol. 47, No.1, pages 7-9). The title is "The Arithmetic of Active Management." It should be required reading for academics and investment professionals alike. (Read the full entry)
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Luck versus Skill in Mutual Fund Performance
By Eugene F. Fama and Kenneth R. French Our paper, "Luck versus Skill in the Cross Section of Mutual Fund Returns," examines the performance during 1984-2006 of actively managed US mutual funds that invest primarily in US equities.  It is an academic paper with lots of technical detail. The purpose of this white paper is to provide a summary of the results that are relevant for investors.  We begin by examining the overall α for aggregate wealth invested in actively managed mutual funds. We then turn to the performance of individual funds. (Read the full entry)
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My Life in Finance
By Eugene F. Fama Foreword I was invited by the editors to contribute a professional autobiography for the Annual Review of Financial Economics. I focus on what I think is my best stuff. Readers interested in the rest can download my vita from the website of the University of Chicago, Booth School of Business. I only briefly discuss ideas and their origins, to give the flavor of context and motivation.  I do not attempt to review the contributions of others, which is likely to raise feathers.  Mea culpa in advance. Professor Fama was invited by the editors of the Annual Review of Financial Economics to contribute a professional autobiography. In this essay, he highlights some of the key ideas and their origins that mark his distinguished career to give the flavor of context and motivation. (Read the full entry)
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More Pages to Explore .....
