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. Eugene Fama More Quotes by Eugene Fama More Quotes From Eugene Fama People are always saying that prices are too high. When they turn out to be right, we anoint them. When they turn out to be wrong, we ignore them. They are typically right and wrong about half the time. Eugene Fama saying ignore time people People don't walk away from their homes unless they can't make the payments. That's an indication that we are in a recession. Eugene Fama recession make walk people I don't believe anyone wants to hear what I have to say. Eugene Fama wants hear say believe I'm an extreme libertarian, but I realize we're in a democracy, and in a democracy, people can have views of all stripes, and there's no reason to argue about it. Eugene Fama realize democracy reason people Active investment is a zero-sum game. Passive managers don't play the game. They buy something resembling the market as a whole, or some segment of the market, and they don't respond to the actions of active managers. Eugene Fama something game investment play I think bubbles are things people see with 20/20 hindsight. If you look at any particular period where prices go up and then they go down, you will always find people who predicted that they would go down. Those are the people you pay attention to. Eugene Fama look think you people I buy the market through index funds. Since I'm getting older, I buy TIPS. Eugene Fama market buy through getting-older After 2008, my brand of finance got a bad rap. Eugene Fama brand bad finance rap The investors who generate big returns over five years, the guys they write books about, are supposed to keep winning, right? Well, they don't. Eugene Fama right well big winning People think rationally that the world really is more risky. Imagine in 2008 that investors thought there was a 10% chance we'd have a depression. That would partly justify the drop in prices. Eugene Fama chance depression people world If you go back to the late '50s, there really was nothing called "academic finance." Well, there was something being taught in business schools as finance, but it really had no strong research underpinnings. Eugene Fama you finance research business The proposition is that prices reflect all available information, which in simple terms means since prices reflect all available information, there's no way to beat the market. Eugene Fama beat information simple way In my junior year in college, I was getting kind of tired of French. So, I took an economics course, and I loved it. The rest of my two years in college I spent in economics. Eugene Fama loved rest economics tired All the central banks are doing is substituting one form of debt with another form of debt. They're issuing short term debt and using it to buy long term debt. In finance, we tend to think that's a neutral activity, even though those stimulus programs are huge. Eugene Fama short think finance long Everybody wants the world to be a better place, and some think that government actions can bring that about. But they don't take into consideration that government actions can often do more harm than good. Eugene Fama good think government world
