Monday, March 08, 2010

The Popular Press & Salt Water Econs Are Wrong about Eugene Fama & The Chicago School!

A very nice retrospective piece from one of the GREATS of financial economics!

[Vindicating Mandelbrot, my thesis (Fama 1965a) shows (in nauseating detail) that distributions of stock returns are fat-tailed: there are far more outliers than would be expected from normal distributions - a fact reconfirmed in subsequent market episodes, including the most recent. Given the accusations of ignorance on this score recently thrown our way in the popular media, it is worth emphasizing that academics in finance have been aware of the fat tails phenomenon in asset returns for about 50 years.]

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