Nobel Laureate Explains How to Beat the Markets | Eugene Fama

do you have any thoughts on Modern monetary Theory um and and yeah all right I I see you do let's uh let's see what do you think is that is that a viable policy to pursue well which one I mean this raising of interest rates they're doing now that that's an experiment this this is the the monetary policy that we've had for the last I guess it's more than 10 years now it's been a new experiment it never existed before I don't like this world actually I mean I I think it's very dangerous we're very

honored to be joined by Dr Eugene Fama he is a Robert R McCormick distinguished service professor of Finance at the University of Chicago Booth School of Business widely regarded as the father of modern Finance we're going to be talking about his work and uh some of his thoughts on the current market conditions Dr Fama an absolute pleasure to host you welcome to my show thank you for being here my pleasure Dr Fama when you wrote the efficient market hypothesis I believe you had said this in another interview you didn't expect the paper to be published

um initially right and and how did it feel knowing that Not only was it published you won the Nobel Prize for it and it kind of changed the fabric of corporate finance forever you never know which which of your research projects is going to get the most attention until time passes and you see what what happens but for this one other people had said similar things but I guess nobody quite put it the way I did so you got a lot of attention and I think it was mostly the empirical stuff that was in my

thesis that got the attention that was somewhat known but going back to the time when computers were first coming online so anybody did a big computer project automatically got a lot of attention uh while it certainly uh it certainly impacted uh my life and my uh my my friends lives as we were students of finance and at the undergraduate level and it was required reading for everybody so you indirectly gave us more homework so thank you for that but uh we learned a lot um before we get into the uh the efficient market hypothesis itself

I like to just ask you a question which is probably something you've been asked way too many times in your lifetime over your career which is that when a fund manager an active fund manager does beat the market you know first of all how is it that he's done that because I do know that you've said in another interview that when an active fund manager beats the market usually it's at the expense of a an active fund manager that is not beating the market that's just arithmetic is it possible to do this consistently and if

so what does that fund manager have that other fund managers do not well the front manager has insights about what determines prices better better than other other people's uh insights but you know the problem is identifying such people so you can't identify them after the fact if you go look at uh people who have done well in the market you're probably just looking at somebody who was lucky you can't have to follow them forward and see whether they continue to do well and then judge whether they actually have have skills so but most the performance

that people measure is actually due to luck good and bad luck going into your theory now the efficient market hypothesis states that markets perfectly reflect all information at any given time there's three forms weak semi-strong and strong we'll we'll get into the details in just a bit but Professor Fama if a fund manager were to have beaten the market say let's say he were to have done that over the course of a certain period consistently and he tells you Dr Fama I've done that because I've made assumptions about the future that I've been consistently correct

it just turns out to be correct I'm not lucky I'm just a good Fork how would you respond to him I'll follow you forward and see if you continue to do it because that's that's an after effect so if I look after the fact there will always be winners there will always be losers but most of those just do the chance so you have to follow them forward and see if they see which ones continue to do it and even out of that group some will continue uh by chance so you have to this is

a statistical thing that uh Ken French and I worked on how how do you determine the difference between lucky luck and skill and we we did this for the whole mutual fund industry and what you see is just a huge range of outcomes by funds over over their lifetimes but it doesn't it looks a lot like what you'd expect by chance if they're all just gonna I'll just say good or bad luck over that time period now there's a little bit of evidence that there is a in the extreme tale there are some people that

do have uh skill but um you in it's very that's yeah there's some evidence that's true before fees and expenses and in other words if they can't pick stocks after fees and expense is very difficult to find anybody they can they can read the market the problem is distinguishing between luck and skill I don't think that's possible for um the typical investor well let's just touch on that real quickly you said you've done research on this what what evidence would you have to look at to determine that somebody is skillful rather than just lucky you

can't do it for individuals so what we did was to take the whole population of mutual fund managers and say what were the outcomes for this whole population look like in other words all of them what would they look like if they were just lucky what kind of distribution of results would you see if everything was due to chance it looks very much like the actual distribution and there's just a little evidence that if you give them back all their fees and expenses the right deal in other words the good tale of the distribution looks

a little thicker than you'd expect by by chance but after freezing expenses that disappears so basically there's not much evidence that investors get better returns from active management certainly there's um there there's the entire passive management industry one could argue was spawned due to your research because I guess people have resigned to the fact that it is not easy or even possible to consistently actively beat the markets over time and so why not just design an index or an index fund rather that just tracks The Benchmark um I guess that leads to my ultimate question

before we talk about your theory is is it possible to consistently beat the markets um without without it being resigned to luck over an extended period of time perhaps over a multi-decade career it's possible anything's possible but the problem is identifying that person and distinguishing elect from skill like that I Define anybody to do after the fact it's impossible uh your strong form that well the strong form version of the theory states that all information including private information is factored into the price and so even if you have Insider information you can't really beat the

markets that's an extreme that's an extreme view I don't I don't think that personally all right that's you know yeah when you do research you have to start with a model that states things in an extreme way and then you look for deviations from from there so that's that's what's true of that that much so I I is it true then that Empirical research suggests that uh the real market performance live somewhere between weak form and and semi-strong no I think it's I think it's pretty strong evidence that uh if so you have to let's

step back a second you can't make a generalization like the one you just made it's always in the context of some specific test okay so what I can say is that for example for the mutual fund industry where the data are good and you can do a lot of testing it looks like pretty much what you'd expect by chance that everything is due to the chance uh but that's you can only go as far as what the data you've looked at tell you I can't say something about the market you know because I've been tested

about everybody just tested it on particular subsets of mutual funds A big one but if I look at Pension funds or things like that I mean the other is pretty pretty much the same just mutual fund data are easier to get well okay well let's let's take let's let's let's back up and just maybe for the audience who may not have studied your work or listened to our prior talk uh tell us the difference between weak forms semi-strong and strong form and and we'll get into an application okay so these are the words I don't

use anymore they were they were my thesis would tell people 1963 here they're on the CFA program Dr Fama everybody has to study it I don't know why but they do well a week for him just says you can't beat the record just using past braces so like chat reading won't work the semi-strong form says you can't do it with published information the strong form says you can't do with any information so that's that's basically what it goes so so markets are the the semi-strong form would say public information can't be used to beat the

market but maybe private information can so maybe the company's insiders have information that the other people uh don't have but the strong problem would say even that's impossible I wouldn't go that far because there's lots of evidence that insiders do have information Outsiders don't uh let's drill a little bit deeper into each form and provide some examples for people to understand let's talk about the weak form first um I know that's probably not what you call it now but uh going back to what you said about technical analysis uh possibly not working that rests on

the assumption that past prices or past price movements don't necessarily tell the future correct I mean there there are there's an entire industry of of people who use just charts they don't even some people I'm not saying all but some people don't even know or care to know what stock they're trading they just look at the charts and they're able to make predictions on or trades on historical price pattern is that something you've studied and how would you evaluate that kind of technique it's a junk okay um there's a famous story about that the Holbrook

working who I think that was working was an economist at Stanford went to the faculty lounge and he had a picture a graph and he said here or here's the behavior of the prices of some agricultural commodity over the past X he is what do you think immediately his colleagues said well here's here's this period of time here's that period of time and they came up in no time at all with theories about what it was and how predictable it was and he said well it turns out this is just accumulated random numbers so this

is just a random walk and you're seeing all kinds of patterns and it that don't really exist they just they just do the chance and that's basically what chat rating is about how would you evaluate certain theories about waves and recurring patterns such as the Elio wave theory or the uh or the theory or hypothesis that all prices eventually mean reverted if you're a certain standard deviation deviation above the mean for a certain amount of time it's eventually going to remain revert downward or upward that's a testicle claim I I would like to tell I

would be he'd have to be specific about the prediction and then you could test it and I wouldn't believe it until I saw the test let's talk about fundamental analysis it's interesting how there's a whole industry around value investing um but if markets are purely efficient then what is a point of having valuation indicators price to sales price book so you you'd have to say that that there are two dimensions of of expected returns one is whether the prices are set properly and the other is what determinants expected Returns the expected returns to get investors

to hold the security yes so investors won't buy stocks if the expected Return To Zero you're going to need some return to some expected attendance commencement with the risk that they that they take so that's the other half of the story that's difficult to kneel down you need some theory about what what does a market equilibrium look like in terms of expected returns how do you measure risk and what's the relation between especially returns and risk so that's that's the whole the whole area of asset pricing is basically around what kind of models do we

need to Define risk and examine the relations between expected returns and risk and if we you if that model is correct how will prices behave that's market efficiency added on top of that model so I kind of pointed out in my first stuff 100 years ago that this was this was the conundrum of market efficiency it had to be tested in the context of Summer's return uh story and that made it very difficult so that these are the two practices that you would have to test so the question you're asking is does a risk story

say something about market efficiency well it doesn't so if a value is a dimension of risk somehow then it can be compensated in expected returns for example tend to be poorly moving companies they tend to be poorly performing companies if that's a dimension of risk of concern to investors it could well be compensated in expected returns are you sorry doctor from are you suggesting that value stocks should have a higher risk premium you know I don't know that's that was we we suggested that as a possibility documenting that it's true so this is this is

the problem with this this kind of thing it takes basically a lifetime of data to say something solid about about the expected returns so you can't just you know five years is nothing 10 years is nothing of stock market data so I can't really say whether it's it's a risk factor in expected returns it's it's shown up in the past as being something that can't be explained by some popular asset pricing models but that doesn't mean it's necessarily an ingredient of a new glass of basic Pharma does the size and liquidity of a stock uh

affect how much public information is absorbed into the price that's that's a popular idea it has never been documented so a popular idea for another variant of that is have markets become more efficient because information is so easily available now and available so quickly and so cheaply and there's really no evidence that my the evidence is that markets have always been uh pretty efficient we can't tell whether they got more efficient as a consequence of more and better information faster available more quickly thirdly now you have not just more information than perhaps when you first

did the study but you have more Market participants um whereas before uh is trading and investing may have only been accessible to uh institutional Traders and investors and perhaps a few retailers on the outliers but now you have an entire uh new demographic of Traders using low-cost trading platforms online um people who have previously not have access to the markets do they alter uh any sort of form of efficiency in the markets that that's an excellent question and there's no research documenting it one way or the other so it could be the case that they

make markets more efficient it could be the case that you just get more dummies in the market and they make the market less efficient it becomes more difficult to make the market efficient and nobody that I know of has come up with a test to tell me which way it goes how does your theory then explain irrational Market behavior let's take the example of dummies for example if they all hurt into a specific stock with no other reason than the fact that they like that stock as we've seen on the internet they're called meme stocks

I mean how does that how does uh EMH explain that behavior it doesn't so irrational Behavior definitely exists its effect on prices is something the uh you hope is exceptional rather than the rules so there are clearly cases you know there are clearly cases where lots of people jump in on a very small stack and they push its price up for a while and then and then it comes out and crashes so you can think of that as the market and efficiency so there are there are examples of things like that that do happen and

I think they're more likely to happen the cheaper that uh trading gets and the more people get get into it uh but you know I think they're they're the exception they're not the rule hopefully because if they become the rule then capitalism is doomed wait wait let wait what did you mean by that why why is capitalism going to be doing well actually the prices are if prices are no good for allocating resources we That's the basis of capitalism is that prices have good signals for research allocation but if they aren't we're in general well

okay so you know let's suppose a Black Swan event were to hit the economy whether it be a window of time between when the event happens and when the information is priced in during which that window probably would be the optimal window to make a trade well you know you'd have to look my thesis actually was on events like that so basically the the fact that the distribution of stock returns is way too fat tails relative to a normal distribution there are too many big returns and too many small returns to be explained by uh

a normal distribution um and there's no evidence so actually I with with three of my students I did it the first so-called event study where we looked at the adjustment of prices to the announcements of of uh stock slits and then the adjustment was basically instantaneous and it wasn't it wasn't in any way and people have there have been thousands of such event studies done since then they generally come up with that result so they can't find evidence it takes takes a while for these things to uh to adjust in most cases they they adjustment

happens very very quickly if it happens slowly that'd be a proper opportunity for somebody to come in and Jade on it but if it's a proper opportunity to send to erase them because people do jump in then in your research how long does it usually take for information to be um priced in that that's a general question I can only answer it in the context of what has actually been been tested so for the stuff that's been tested basically instantaneous but based on your theory then what what the best move for an investor over the

long term just to buy a low-cost Index Fund to just to buy and hold basically if uh unless you know they they get out of whack in terms of risk and they want to rebalance but basically they shouldn't be trying to predict the market or individual prices they should just be diversifying and you know put it in and let it let it run has there been any evidence to suggest that value beats growth stocks or vice versa well over the historical period from 1926 to maybe the last 10 years value stocks did better than growth

stocks basically around the world but that reverse the last 10 years but the problem with that is as I said earlier ten years really isn't enough data to say anything solid so maybe the value premium has gone down maybe it doesn't exist anymore but we don't have enough data to tell You'll Ever After I I'm curious as to whether or not you think the Advent of artificial intelligence is going to uh change asset pricing or even the asset management industry when you have a computer that's Advanced enough to process Millions perhaps even billions of data

sets instantaneously and and make an investment decision based on information that no one human could have at any one given time does that change first of all anything in your model and second does that change ultimately the nature of the asset management industry well so somebody has to write that program an AI program and that program has that built into it a way to tell which which things are underpriced and which things are are overpriced so that presumes that presumes the existence of such such talents now I don't know why if I had those talents

I don't know why I'd ever put them into a a program that everybody would have access to I think I would use my I think I would use them myself um well let me ask you this then hypothetically you mean you don't have to give all the details away if you don't want to but if you were to design such a program for yourself what are some of the um what what does this program need to be able to do what information do you need to feed this program in order for you as an investor

using this program to beat the markets better predictions of the future um you know that's that's the bottom line in all of this but I don't know how you do that with just a a hub a program with a really NASA programs but sit down and write a program to do this to predict the future it's too much they have too many random variables and and in the economic results to do that at least at least in my opinion at this point in time who knows I mean I'm not an expert in artificial intelligence or

I think I am I think it's all around me actually artificial intelligence mostly the active management industry yeah well um I want to move on and talk about some some current events I mean when you I think we talked about this briefly uh last time we spoke you and I and we talked about how inflation is ordering for you do you have any thoughts on Modern monetary Theory um and and you know all right I I see you do let's uh let's see what do you think is that is that a viable policy to pursue

well which one I mean this raising of interest rates they're doing now that that's an experiment this this is the monetary policy that we've had for the last I guess it's more than 10 years now it's been a new experiment it never existed before where the federal reserve's balance sheet got so huge um and where they started to pay interest on on reserves because otherwise the banks wouldn't hold the reserves that in the old days we said the the amount of money supply the basic the basic money supply the determined inflation was the monetary base

which is currency plus reserves and the FED does control that base you know it did in the old days in the in reserves did not pay interest so there was an opportunity cost to hold in a bank statement unless they really really needed them but now we have several trillion dollars worth of reserves out there and they pay interest in their freely exchangeable for currency so it's not clear what how inflation gets determined in that world now what what stops it I'm in finance so most of the people in macro don't think like people in

finance in other words they talk about the interest rate there's no such thing in finance there's a whole range of interest rates and there's a whole range of risk premiums that face firms making their their decisions so the the issue is for example the FED raises the federal funds right now I think it's pushing you know push it up now it's above four percent I think so that's the overnight rate on risk-free loans basically government debt the FED fed Reserve is basically government debt so that's the overnight radiant government wants us to capitalize that nobody

that I know so why should have a big effect on economic activity or inflation I don't know if if it will or not I don't think we have a good model for that I haven't seen one and I know all the pretty good people in uh in macroeconomics so they have models but you know they don't they strike me as being toy models because they always talk about the interest rate there's no such thing what doesn't deal doesn't the overnight rate Dr felma affect all other interest rates it I did a paper on that actually

oh really the effect the effect kind of Peters out after about um two years so beyond two years Beyond two years is no noticeable effect but it Pete is out before that I mean it's losing its it's losing it's it's uh its ability to push those rights slowly but surely as the maturity lengthens so if you ever go out two years who's across the capital is the two-year interest rate nobody's going back to Modern monetary Theory it's the idea that the government that the Federal Reserve can increase in money supply without any consequence to inflation

is that is that a theory that you've you've analyzed or is there any evidence suggests that it's true well the old Theory I would have accepted when it was the case that there was a well-defined money supply which was the monetary base in my view which is currency plus reserves but that was in the world where reserves did not pay interest now if they pay interest Community bases lost its meaning so I don't know what determines inflation let's put it this way I don't know how you control it I don't know how you control inflation

in their world there are several monetarists including Alan Greenspan who may have believed that to control inflation is to control the money supply which is to bring down the empty money stock the growth would change inflation rate now the green screen span knew that when he talked about the minister and stuff and you know I think he knew that that meant the base the monetary base is not defined anymore now that the reserves pay full interest just doesn't it's just part of normal security a lot of security is outstanding so the you have currency that's

that's still money doesn't pay any interest but reserves pay full Market interest ing push the interest rate on them above the market I don't like this world actually I mean I I think it's very dangerous what's dangerous about it Dr Fama I mean I'm not convinced that they have any control over inflation so I want to say somebody asked me what determines inflation I say inflation is what it is I don't think anybody has any control over it anymore the the question of how to solve our inflation problem or a future inflation problem is a

hotly debated topic amongst academics and researchers and Industry professionals uh how would you respond to the fiscalist school of thought which is that taxes have a direct impact on inflation is that something you've observed the fiscal Theory says you have to combine I think what it says is you have to combine the uh the fiscal activities of the government with the monetary activities of the government and that will tell you where the money supply has to go in order to clear all the books of the the government in the private sector so it's basically saying

if you don't raise taxes you better you're going to start printing printing money um I'm not sure I buy that but uh Dr Fama I like you to comment on the uh risk of the dollar collapsing which is a rhetoric I've been hearing on on the news a lot and there's there's two arguments that that I've that I heard regarding this topic the first is that there's a dedolarization trend happening which is to say that other countries other major uh economies around the world have been or are starting to trade uh amongst themselves using another

currency that is not the US dollar we're starting to see for example uh countries trade oil in another currency that's not the US dollar in other words the petrol dollar is being phased out and this could pose a risk to the US Dollar's status as a sole Reserve currency now the second argument for a dollar collapse is that the Federal Reserve has simply printed too much money has created um a large enough balance sheet that will warrant perhaps a hyperinflationary scenario down the line and so hyperinflation and where you even just very high inflation will

eventually erode the Dollar's value you how would you evaluate these arguments yeah so the the latter one was would have been true if they never paid interest on reserves so if they just expanded put out two trillion dollars worth of reserves and didn't pay interest on them then we'd have hyperinflation but they didn't they put the reserves out and they knew they had to pay interest on them if they wanted them to be so so big so that one went by the boards when you started paying interest what happened with that was you couldn't control

inflation with the monetary base anymore you have to have something different and they're they're betting it fooling around with the federal funds rate will do the trick and I'm not at all convinced of this that's true now there was a second part of your question that said I forgot stuff so yes that the first theory was that uh um as the dollar loses its status well first oh wait wait yeah that's a good one there's so much there's so much misunderstanding of that uh that it's laughable so here's the misunderstanding the dollar is not the

international currency it's the international Union of account you use both of those both of those terms those are two different things so when I say it's the unit of account all that means is prices for international trade get stated in dollars but people aren't transacting in dollars they're just stating prices in dollars then they settle in something else so people are holding tons of dollars in order to do their their business they just stating prices in dollars and then exchanging something some other some other claims to uh to clearly uh clear the accounts so whether

or not your currency is the unit of account I can't see that that that's important for anything the the currency that went into that game tends to be the one that's that's uh most stable in terms of real value so if we're stable in terms of real value we'll win the game when you see headlines like Saudi Arabia uh selling oil or other perhaps other Goods to another country in another currency that's not the US dollar in other words they stop using the petrol dollar when you see headlines like China and the US sorry the

China and Russia uh trading amongst themselves with using the Chinese yuang uh does that have any impact whatsoever on the strength of the dollar going forward no no they they the Chinese and the Russians are going to trade the same things no matter what prices they State them in so if they they State their dollars they're still going to Australian whatever the Japanese they can even remember the word for the Japanese uh yeah again yes Japan so yeah the Chinese probably don't want things stated in Google in any case because it's too too variable but

it's the difference between a unit of account and something that you actually take in exchange the dollar is not taken in exchanges it's just prices have stated in terms of dollars the the other concern I've heard among some academics is that as you see over the last couple of decades the US dollar roughly in in the past accounted for roughly 80 percent of global trade which is to say that 80 of global trade was denominated in US Dollars that's come down to about 60 let's assume this trend were to continue and it goes down is

that an indication of American power both militarily politically and economically no no so so you see a location it's an indication that prices in dollars are stable so it's cheap it's uh it's sufficient to quote prices in a unit of account that's stable in terms of real value that sounds I couldn't see anything else okay because there's been a lot of concern again um of people saying that well you know I should I should sell my US Dollars now because there should be another currency in the future in the distant future perhaps that could challenge

whatever that means rival the US dollar in hedge money um is is that is that can you evaluate that investing uh idea I can say it doesn't matter it tells you where the if the dollar loses its places in the unit of account what it says is somehow it's real bad you've got two variable and people didn't want the people didn't want to use it anymore so there's always competition between units of account for being the king of how people say prices but that doesn't mean that has any benefit to the country that wins it

except it does say that prices are probably the the real value of their currency is probably pretty stable people aren't actually holding their currency they're just holding prices in it so for example when Israel was having a hyperinflation they started quoting prices in dollars but they weren't trading dollars they were trading in their local currencies or they were actually probably doing a lot of buttering and but the dollar was the unit which they were stating prices but they weren't actually trading dollars some people have said that one way to fight inflation is to Anchor the

currency to some hard asset in other words a return to the gold standard doesn't necessarily have to be gold it could be a new digital currency for example is that is that a theory that you subscribe to uh the dollar is a digital currency I'm talking about let's say Bitcoin uh but you know it's a totally different subject actually um which one do you want let's talk about gold first because there's naturally well the price of gold is too variable to be there to stay bright you see the price of gold has gone all over

the place in the last 25 years so you that clearly is not going to be a good unit of account so you're going to want something that has a stable price what if we fix the price of gold again which was what happened during Bretton Woods you're not gonna be able to do it I don't think okay but I mean who knows what I mean I don't think you can do it you're not going to go back to 32 dollars that's for sure deflation you're going to have massive deflation is that what you said sure

if you can get the price of gold down to 32 somehow you know prices get stated in terms of that so somehow you guys have a big deflation to get there all right so so bottom line you know you don't think the US will ever hyperinflate to the extent of the Weimar Republic let's say well who knows I mean who knows we're running huge government deficits we're going to pay them back by raising taxes are we going to pay them back by somehow devaluing they could could be here the value of the promises and that's

inflation that's the physical Theory by the way you got to pay your bills either by taxes or by inflation which is better it depends on what you're holding [Laughter] um I I have a final investing question and then I have a fun question um some people economists whether or not they're right or wrong is is it diff is a different story but some people are projecting in a recession to hit our economy soon if not already in a recession uh do you know any strategies over the course of your studies and career uh with which

you can beat recession that is to say certain types of stocks or indices or in or or sectors that have consistently done well during periods of economic contraction I don't know but that doesn't mean it's not true I just have never studied that topic okay um you told me offline last question you told me offline your um you're you're mentoring and teaching a group of graduate students what is the most what are some of the most interesting uh thesis ideas that I've been proposed to you oh [Music] so it kind of still is floating around

ask me again in 10 weeks and I'll tell you all right um any advice to uh to a to a young student learning economics um you know I remember when I was in undergrad I hated the math but well you know I was that was a language major in college so I'm a village idiot as far as math is concerned I I I think uh Eugene farmer calling himself a village idiot is probably this the irony of the century um would you recommend a student let's say today to study uh what would be somebody somebody

wants to be successful okay whatever that word means um he says to you Dr Fama I like to go to college I like to study something I want to make a lot of money I don't know what I want to do with my life I just want to make a lot of money what would you say to that person well I don't think um I think studying economics is a good start uh here's the best thing though find find something you love to do this is the advice I give to young people they want to

want to get rich find something you love to do and make sure not too many other people want to do it because don't tell me you want to be a ballerina because too many people want to be ballerinas you know so you could be very very good but you're not going to make a lot of money but tell me something else there's not a lot of people want to do that you love to do that's where you should go but I can't tell you what that is that that's a personal decision have you always loved

economics or was this a professional I I never heard in high school ever I've been to college I had never heard about economics so I hadn't I intended to be to study languages and become a high school teacher and a sports coach and then I took an economics course in my junior year in college and I loved it and I immediately switched switched to uh economics it's the major thing I was studying in my last two years and I've been doing it ever since so actually I think you've stated before that when you first started

doing research in corporate finance it was a relatively new academic field was not um what was your impression of this discipline and what do you think it needed more of well there wasn't any it didn't exist basically so academic Finance didn't didn't exist Harry Markowitz wrote the first asset pricing book it was his thesis in the economics Department in Chicago was portfolio Theory and that wasn't I don't think there was anybody there that could happen with him he did it all on his on his own and uh Miller and Robert Eagle had any started off

corporate finance and around the same time her late 50s or early 60s when they came up with the famous modigliano Miller theorems and then you know the efficient market stuff came around in the early 60s and then option pricing in the early 70s and you know since then we've been kind of developing how all those themes in a heart and heavy way so there's much more stuff available now basically when I started it it was like shooting fish in the barrel they were there wasn't much research of any Merit that had been done in in

finance before before that so it wasn't that I was a genius and I think it was just that people weren't thinking in those terms at that point and I happened to get exposed to people like Harry Robertson Burton Miller who were interested in it and they they gave me a lot of help to get going so a lot of other people that deserve any success that I I've had in my my career well uh Dr falma I appreciate your time today that was a very um the very generous UC for time thank you and uh

thank you again for all the work that you've done and uh your contributions to corporate finance are our industry would not have been the same without your work so thank you again my pleasure and uh we'll speak again soon thank you for watching my show and uh please subscribe okay [Applause] foreign