Gene Fama on Efficient Markets and the Casualties of the Financial Crisis

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Professor Eugene F. Fama of the University of Chicago Booth School of Business, a speaker at the 65th CFA Institute Annual Conference in Chicago, has spent his career re-defining what investors know about markets — beginning with his PhD thesis and a 1970 Journal of Finance article, “Efficient Capital Markets: A Review of Theory and Empirical Work,” that led to his being known as the “father of efficient market hypothesis.”

Since then, Professor Fama has continued his work on portfolio theory, adding to the asset pricing tools and techniques available to investors and analysts and gaining recognition such as the Nicholas Molodovsky Award, which he received from CFA Institute in 2006. Professor Fama’s research has expanded on the Capital Asset Pricing Model (CAPM) with the Fama–French 3-factor model, and he co-developed the Fama–Macbeth two-stage regression used to estimate parameters for asset pricing models. He and Nobel laureate Merton H. Miller also co-authored a textbook, The Theory of Finance.

Online, Professor Fama actively contributes to the Fama/French Forum, where he answers questions and posts his opinions, research, and links.

Last year, Professor Fama was interviewed by the New Yorker to discuss how his efficient market hypothesis had fared in the wake of the global financial crisis. In Professor Fama’s opinion, the recession pre-dated August 2007, and the events of the global financial crisis unfolded “exactly how you would expect the market to work.” He also asserts that “the financial markets were a casualty of the recession, not a cause of it.”

Professor Fama will be providing insights into portfolio theory, asset pricing, and The Evolution of Financial Theory at the 65th CFA Institute Annual Conference in Chicago on 6–9 May 2012. You can register to attend the event to hear more from Professor Fama in person, and follow this blog for more speaker updates as the conference draws closer.

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