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Quote by Eugene Fama

“The distribution of the market is fat-tailed relative to the normal distribution... For passive investors, none of this matters, beyond being aware that outlier returns are more common than would be expected if return distributions were normal.”

Quote by Eugene Fama

Author

Eugene Fama, born on February 14, 1939, is an esteemed economist whose research has had a profound impact on the field of finance. He is best known for his work on the Efficient Market Hypothesis (EMH), which emphasizes the information efficiency of markets, and for developing the Capital Asset Pricing Model (CAPM) with Kenneth French and James MacKinlay. Fama's research has significantly influenced investment portfolio management and financial decision-making. more

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“The thing that I have been emphasizing in my own work for the last few years has been the group approach. To try to buy groups of stocks that meet some simple criterion for being undervalued-regardless of the industry and with very little attention to the individual company.”

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“Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud.”

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“Index funds have regularly produced rates of return exceeding those of active managers by close to 2 percentage points. Active management as a whole cannot achieve gross returns exceeding the market as a while and therefore they must, on average, underperform the indexes by the amount of these expense and transaction costs disadvantages.”

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“Still, I figure we shouldn't' discourage fans of actively managed funds. With all their buying and selling, active investors ensure the market is reasonably efficient. That makes it possible for the rest of us to do the sensible thing, which is to index. Want to join me in this parasitic behavior? To build a well-diversified portfolio, you might stash 70 percent of your stock portfolio into a Wilshire 5000-index fund and the remaining 30 percent in an international-index fund.”