Eugene F. Fama
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Three US Economists Win Nobel for Work on Asset Prices 14 October 2013, by Karl Ritter
Three US economists win Nobel for work on asset prices 14 October 2013, by Karl Ritter information that investors can't outperform markets in the short term. This was a breakthrough that helped popularize index funds, which invest in broad market categories instead of trying to pick individual winners. Two decades later, Shiller reached a separate conclusion: That over the long run, markets can often be irrational, subject to booms and busts and the whims of human behavior. The Royal Swedish Academy of Sciences noted that the two men's findings "might seem both surprising and contradictory." Hansen developed a statistical method to test theories of asset pricing. In this Monday, June 15, 2009, file photo, Rober Shiller, a professor of economics at Yale, participates in a panel discussion at Time Warner's headquarters in New York. The three economists shared the $1.2 million prize, Americans Shiller, Eugene Fama and Lars Peter Hansen the last of this year's Nobel awards to be have won the Nobel Memorial Prize in Economic announced. Sciences, Monday, Oct. 14, 2013. (AP Photo/Mark Lennihan, File) "Their methods have shaped subsequent research in the field and their findings have been highly influential both academically and practically," the academy said. Three American professors won the Nobel prize for economics Monday for shedding light on how Monday morning, Hansen said he received a phone stock, bond and house prices move over time— call from Sweden while on his way to the gym. He work that's changed how people around the world said he wasn't sure how he'll celebrate but said he invest. -
Risk, Return, and the Overthrow of the Capital Asset Pricing Model Andrew West, CFA Manager, Investment Research
Special Topics: Fundamental Research March 2014 Risk, Return, and the Overthrow of the Capital Asset Pricing Model Andrew West, CFA Manager, Investment Research Harding Loevner invests based on common-sense principles drawn Competitive advantage within a favorable industry structure is a from our founders’ experience: we stick to high-quality, growing prerequisite for durable profitability in a company. A company in companies that we can identify through fundamental research. This an industry with unfavorable dynamics has a much steeper chal- general philosophy flows naturally from our nature as cautious, pa- lenge than one well-positioned with few rivals and strong bargain- tient people. It has been a constant throughout our firm’s existence ing power over buyers and suppliers. But, we also require that our since it was founded in 1989. In contrast to the boring continuity of companies possess competitive advantages that will allow them to thought in our little community, the prevailing wisdom in the larger sustain superior levels of return over time. Our analysts are primarily world of academic investment theory has turned about completely organized by industry rather than by geography as we believe that over this same quarter century. Theories regarding market behavior the understanding of industry structure and peer groups is key to and investment outcomes that were proclaimed as essential verities identifying such investment opportunities. and celebrated with Nobel Prizes at the beginning of this period were subsequently overturned at the end. That academic battle is an en- Sustainable growth allows cash flow and earnings to compound as grossing tale that we have followed with interest. -
Using Equity Market Reactions to Infer Exposure to Trade Liberalization
Using Equity Market Reactions to Infer Exposure to Trade Liberalization Andrew Greenland∗ Mihai Iony John Loprestiz Peter K. Schott§ First Draft: June 2018 This Draft: June 2019{ Abstract We develop a method for identifying firm exposure to changes in policy using ab- normal equity returns, and employ it to study US trade liberalization with China. Abnormal returns surrounding the liberalization’s passage into law vary substantially even within industries, are correlated with but have explanatory power beyond tradi- tional measures of import competition, and predict sharper relative changes in operating profit, employment and capital than abnormal returns during randomly chosen days. Predicted relative increases in operating profit among the very largest firms swamp the losses of smaller firms, providing further insight into this liberalization’s distributional implications. ∗Martha and Spencer Love School of Business, Elon University; [email protected] yEller College of Management, University of Arizona; [email protected] zThe College of William & Mary; [email protected] §Yale School of Management & NBER; [email protected] {We thank Kerem Cosar, Teresa Fort, Justin Pierce and seminar participants at CUHK, Elon University, the Fed Board, Hitotsubashi, LSE, the Mid-Atlantic Trade Workshop, UNC Chapel Hill, the University of Toronto and the University of Tokyo for helpful comments and feedback. 1 Introduction We propose a method for measuring firm exposure to changes in policy. Our approach is based on financial markets’ reactions to key events associated with the new regime, e.g., the legislative votes during which it becomes law, and assumes that all new information relevant for firm value is fully reflected in its stock price. -
Y La Política Económica)
Valeriano F con suesposaysuscuatrohijos. Desde 1987resideenWashington (Buenos Aires,1988) "El ABC(ylaZ)deeconomía" Alvaro Saieh,(BuenosAires,1984),yel precios ypolíticamonetaria"con mas destacadossecuentan"Dinero, reformas bancarias.Entresuslibros estabilidad macroeconómicay cambiarios, mercadosdecapitales, publicaciones relativosaregímenes Es autordenumerososensayosy económicas. crisis bancariasypolíticasmacro- pitales yenlasinterrelacionesentre de desarrollomercadosca- en elCEMLA.Esexpertoproblemas en universidadesdeArgentina,Chiley profesor deeconomíaeinvestigador obtuvo sudoctoradoen1973.Fue Universidad deChicago,donde Realizó estudiosdepostgradoenla en elBancoMundial. actualmente comoDirectorEjecutivo [email protected] Valeriano F Correo electrónico: . Garcíasedesempeña . García CEMLA PARA ENTENDER LA ECONOMÍA POLÍTICA (Y LA POLÍTICA ECONÓMICA) Valeriano F. García ECONÓMICA) (Y LAPOLÍTICA POLÍTICA LA ECONOMÍA P TEXTOS BÁSICOS V aleriano F ARA ENTENDER . García Valeriano F. García PARA ENTENDER LA ECONOMÍA POLÍTICA (Y LA POLÍTICA ECONÓMICA) CENTRO DE ESTUDIOS MONETARIOS LATINOAMERICANOS México, D. F. 2000 Primera edición, 2000 © Centro de Estudios Monetarios Latinoamericanos, 2000 Derechos reservados conforme a la ley ISBN 968-6154-66-3 Impreso y hecho en México Printed and made in Mexico A mi esposa Estela, y a nuestros hijos Álvaro, Sebastián, Valeriano y Bárbara Para entender la economía política… PRÓLOGO Este libro es una introducción a los principios y conceptos básicos de la economía política. He querido hacer un libro que, sin dejar de lado un rigor mínimo, sea a la vez intere- sante y formativo. La idea detrás de estas páginas es explicar conceptos en forma simple pero estricta. Ello para que, ya sea como profesional o ciudadano, el lector sepa cómo y por qué le pueden afectar, a él o a su país, nuevas leyes de sala- rio mínimo, un nuevo régimen cambiario o leyes para prote- ger a la mujer en el mercado de trabajo, etcétera. -
Myron S. Scholes [Ideological Profiles of the Economics Laureates] Daniel B
Myron S. Scholes [Ideological Profiles of the Economics Laureates] Daniel B. Klein, Ryan Daza, and Hannah Mead Econ Journal Watch 10(3), September 2013: 590-593 Abstract Myron S. Scholes is among the 71 individuals who were awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel between 1969 and 2012. This ideological profile is part of the project called “The Ideological Migration of the Economics Laureates,” which fills the September 2013 issue of Econ Journal Watch. Keywords Classical liberalism, economists, Nobel Prize in economics, ideology, ideological migration, intellectual biography. JEL classification A11, A13, B2, B3 Link to this document http://econjwatch.org/file_download/766/ScholesIPEL.pdf ECON JOURNAL WATCH Schelling, Thomas C. 2007. Strategies of Commitment and Other Essays. Cambridge, Mass.: Harvard University Press. Schelling, Thomas C. 2013. Email correspondence with Daniel Klein, June 12. Schelling, Thomas C., and Morton H. Halperin. 1961. Strategy and Arms Control. New York: The Twentieth Century Fund. Myron S. Scholes by Daniel B. Klein, Ryan Daza, and Hannah Mead Myron Scholes (1941–) was born and raised in Ontario. His father, born in New York City, was a teacher in Rochester. He moved to Ontario to practice dentistry in 1930. Scholes’s mother moved as a young girl to Ontario from Russia and its pogroms (Scholes 2009a, 235). His mother and his uncle ran a successful chain of department stores. Scholes’s “first exposure to agency and contracting problems” was a family dispute that left his mother out of much of the business (Scholes 2009a, 235). In high school, he “enjoyed puzzles and financial issues,” succeeded in mathematics, physics, and biology, and subsequently was solicited to enter a engineering program by McMaster University (Scholes 2009a, 236-237). -
The Fama-French Factors As Proxies for Fundamental Economic Risks
The Fama-French factors as proxies for fundamental economic risks Maria Vassalou Working Paper No. 181 Working Paper Series Center on Japanese Economy and Business Columbia Business School November 2000 The Fama-French factors as proxies for fundamental economic risks Maria Vassalou* Columbia University and CEPR First Draft: October 1999 This Draft: June 2000 * Graduate School of Business, Columbia University, 3022 Broadway, 416 Uris Hall, New York, NY 10027, tel: 212-854 4104, e-mail: [email protected]. Financial support from the Center for Japanese Economy and Business at Columbia Business School is gratefully acknowledged. 1 The Fama-French factors as proxies for Fundamental Economic Risks Abstract This paper provides an economic interpretation for the book-to-market (HML) and size (SMB) factors in the Fama-French model using data from ten developed countries. We show that part of the information in these factors that is priced in equity returns, refers to news about future GDP growth. However, a model that includes only the market factor and news about future GDP growth cannot explain asset returns as well as the Fama-French model does. Our tests reveal that HML and SMB also contain important information about the current default premium. A model that includes the information in HML and SMB about the default premium and news about future GDP growth, together with the market factor, can successfully replicate the performance of the Fama-French model in the US. Our results suggest that HML and SMB summarize information about two state variables: the current default premium and news about future GDP growth. -
The Past, Present, and Future of Economics: a Celebration of the 125-Year Anniversary of the JPE and of Chicago Economics
The Past, Present, and Future of Economics: A Celebration of the 125-Year Anniversary of the JPE and of Chicago Economics Introduction John List Chairperson, Department of Economics Harald Uhlig Head Editor, Journal of Political Economy The Journal of Political Economy is celebrating its 125th anniversary this year. For that occasion, we decided to do something special for the JPE and for Chicago economics. We invited our senior colleagues at the de- partment and several at Booth to contribute to this collection of essays. We asked them to contribute around 5 pages of final printed pages plus ref- erences, providing their own and possibly unique perspective on the var- ious fields that we cover. There was not much in terms of instructions. On purpose, this special section is intended as a kaleidoscope, as a colorful assembly of views and perspectives, with the authors each bringing their own perspective and personality to bear. Each was given a topic according to his or her spe- cialty as a starting point, though quite a few chose to deviate from that, and that was welcome. Some chose to collaborate, whereas others did not. While not intended to be as encompassing as, say, a handbook chapter, we asked our colleagues that it would be good to point to a few key papers published in the JPE as a way of celebrating the influence of this journal in their field. It was suggested that we assemble the 200 most-cited papers published in the JPE as a guide and divvy them up across the contribu- tors, and so we did (with all the appropriate caveats). -
The Efficient Market Hypothesis
THE EFFICIENT MARKET HYPOTHESIS A Thesis Presented to the Faculty of California State Polytechnic University, Pomona In Partial Fulfillment Of the Requirements for the Degree Master of Science In Economics By Nora Alhamdan 2014 SIGNATURE PAGE THESIS: The Efficient Market Hypothesis AUTHOR: Nora Alhamdan DATE SUBMITTED: Spring 2014 Economics Department Dr. Carsten Lange _________________________________________ Thesis Committee Chair Economics Dr. Bruce Brown _________________________________________ Economics Dr. Craig Kerr _________________________________________ Economics ii ABSTRACT The paper attempts testing the random walk hypothesis, which the strong form of the Efficient Market Hypothesis. The theory suggests that stocks prices at any time “fully reflect” all available information (Fama, 1970). So, the price of a stock is a random walk (Enders, 2012). iii TABLE OF CONTENTS Signature Page .............................................................................................................. ii Abstract ......................................................................................................................... iii List of Tables ................................................................................................................ vi List of Figures ............................................................................................................... vii Introduction .................................................................................................................. 1 History ......................................................................................................................... -
CURRICULUM VITAE August, 2015
CURRICULUM VITAE August, 2015 Robert James Shiller Current Position Sterling Professor of Economics Yale University Cowles Foundation for Research in Economics P.O. Box 208281 New Haven, Connecticut 06520-8281 Delivery Address Cowles Foundation for Research in Economics 30 Hillhouse Avenue, Room 11a New Haven, CT 06520 Home Address 201 Everit Street New Haven, CT 06511 Telephone 203-432-3708 Office 203-432-6167 Fax 203-787-2182 Home [email protected] E-mail http://www.econ.yale.edu/~shiller Home Page Date of Birth March 29, 1946, Detroit, Michigan Marital Status Married, two grown children Education 1967 B.A. University of Michigan 1968 S.M. Massachusetts Institute of Technology 1972 Ph.D. Massachusetts Institute of Technology Employment Sterling Professor of Economics, Yale University, 2013- Arthur M. Okun Professor of Economics, Yale University 2008-13 Stanley B. Resor Professor of Economics Yale University 1989-2008 Professor of Economics, Yale University, 1982-, with joint appointment with Yale School of Management 2006-, Professor Adjunct of Law in semesters starting 2006 Visiting Professor, Department of Economics, Massachusetts Institute of Technology, 1981-82. Professor of Economics, University of Pennsylvania, and Professor of Finance, The Wharton School, 1981-82. Visitor, National Bureau of Economic Research, Cambridge, Massachusetts, and Visiting Scholar, Department of Economics, Harvard University, 1980-81. Associate Professor, Department of Economics, University of Pennsylvania, 1974-81. 1 Research Fellow, National Bureau of Economic Research, Research Center for Economics and Management Science, Cambridge; and Visiting Scholar, Department of Economics, Massachusetts Institute of Technology, 1974-75. Assistant Professor, Department of Economics, University of Minnesota, 1972-74. -
Economic Fundamentals, Risk, and Momentum Profits
Economic Fundamentals, Risk, and Momentum Profits Laura X.L. Liu,JeroldB.Warner∗ ,† and Lu Zhang‡ February 2004§ Abstract We study empirically the changes in economic fundamentals for firms with recent stock price momentum. We find that: (i) winners have temporarily higher dividend, investment, and sales growth rates, and losers have temporarily lower dividend, investment, and sales growth rates; (ii) the duration of the growth rate dispersion matches approximately that of the momentum profits; (iii) past returns are strong, positive predictors of future growth rates; and (iv) factor-mimicking portfolios on expected growth rates earn significantly positive returns on average. This evidence is consistent with the theoretical predictions of Johnson (2002), in which momentum returns reflect compensation for temporary shifts in risk associated with expected growth. Additional tests do not provide much support for a risk-based explanation, however. ∗Doctoral Student in Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-4604; Email: [email protected]. †Fred H. Gowen Professor of Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-2678; Email: [email protected]. ‡Assistant Professor of Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-3491; Email: [email protected]. §We thank seminar participants at Michigan State University and University of Rochester for helpful comments. 1 Introduction The momentum literature, e.g., Jegadeesh and Titman (1993), finds that strategies that buy past winners and short past losers earn significantly positive average returns over the subsequent six to 12 months. -
Measuring Capital in the New Economy
This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Measuring Capital in the New Economy Volume Author/Editor: Carol Corrado, John Haltiwanger and Dan Sichel, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-11612-3 Volume URL: http://www.nber.org/books/corr05-1 Conference Date: April 26-27, 2002 Publication Date: August 2005 Title: Intangible Risk Author: Lars Peter Hansen, John C. Heaton, Nan Li URL: http://www.nber.org/chapters/c10620 Chapter pages in book: (111 - 152) 4 Intangible Risk Lars Peter Hansen, John C. Heaton, and Nan Li 4.1 Introduction Accounting for the asset values by measured physical capital and other inputs arguably omits intangible sources of capital. This intangible or un- measured component of the capital stock may result because some invest- ments from accounting flow measures are not eventually embodied in the physical capital stock. Instead there may be scope for valuing ownership of a technology, for productivity enhancements induced by research and de- velopment, for firm-specific human capital, or for organizational capital. For an econometrician, intangible capital becomes a residual needed to account for values. In contrast to measurement error, omitted information, or even model approximation error, this residual seems most fruitfully cap- tured by an explicit economic model. It is conceived as an input into tech- nology whose magnitude is not directly observed. Its importance is some- times based on computing a residual contribution to production after all other measured inputs are accounted for. Alternatively it is inferred by com- paring asset values from security market data to values of physical mea- sures of firm or market capital. -
Do Stock Prices Move Too Much to Be Justified by Subsequent Changes
Do Stock Prices Move Too Much to be Justifiedby SubsequentChanges in Dividends? By ROBERTJ. SHILLER* A simple model that is commonlyused to and RichardPorter on the stock market,and interpret movements in corporate common by myself on the bond market. stock. price indexes asserts that real stock To illustrategraphically why it seems that prices equal the present value of rationally stock pricesare too volatile,I have plotted in expected or optimally forecastedfuture real Figure 1 a stock price index p, with its ex dividendsdiscounted by a constant real dis- post rational counterpart p* (data set 1).' count rate. This valuation model (or varia- The stock price index pt is the real Standard tions on it in which the real discount rate is and Poor's Composite Stock Price Index (de- not constant but fairly stable) is often used trended by dividing by a factor proportional by economistsand marketanalysts alike as a to the long-run exponential growth path) and plausible model to describe the behaviorof p* is the present discounted value of the aggregatemarket indexes and is viewed as actual subsequentreal dividends (also as a providing a reasonable story to tell when proportionof the same long-rungrowth fac- people ask what accounts for a sudden tor).2 The analogous series for a modified movement in stock price indexes. Such Dow Jones IndustrialAverage appear in Fig- movementsare then attributedto "new in- ure 2 (data set 2). One is struck by the formation" about future dividends. I will smoothness and stability of the ex post ra- refer to this model as the "efficientmarkets tional price series p* when compared with model"although it shouldbe recognizedthat the actualprice series.This behaviorof p* is this name has also been applied to other due to the fact that the presentvalue relation models.