Government Equity Capital for Financial Firms
By EUGENE F. FAMA The financial sector provides the grease that makes the transfer of savings to productive investments more efficient. This role is critical for the health of the economy. Government...
View ArticleBailouts and Stimulus Plans
By EUGENE F. FAMA There is an identity in macroeconomics. It says that in any given year private investment must equal the sum of private savings, corporate savings (retained earnings), and government...
View ArticleBailouts and Stimulus Plans - Addendum 1/16/09
By EUGENE F. FAMA There has been lots of response to my little essay on bailouts and stimulus plans. I will only comment on the negative ones that I think have merit and are overlooked in my original...
View ArticleBailouts and Stimulus Plans - Addendum 1/28/09
By EUGENE F. FAMA In his NY Times blog Paul Krugman attacks my piece on the stimulus plan. Again, here is my argument in three sentences. 1. Bailouts and stimulus plans must be financed. 2. If the...
View ArticleHow Unusual Was the Stock Market of 2008?
By Eugene F. Fama and Kenneth R. French The cap-weighted market portfolio of NYSE-Amex-Nasdaq stocks delivered a -38.31% return for 2008. The experience was painful, but was it out of bounds? The...
View ArticleWhy Active Investing Is a Negative Sum Game
By Eugene F. Fama and Kenneth R. French William F. Sharpe has a great article in the January/February 1991 issue of The Financial Analysts Journal (Vol. 47, No.1, pages 7-9). The title is "The...
View ArticleLuck versus Skill in Mutual Fund Performance
By Eugene F. Fama and Kenneth R. French Our paper, "Luck versus Skill in the Cross Section of Mutual Fund Returns," examines the performance during 1984-2006 of actively managed US mutual funds that...
View ArticleMy Life in Finance
By Eugene F. Fama Foreword I was invited by the editors to contribute a professional autobiography for the Annual Review of Financial Economics. I focus on what I think is my best stuff. Readers...
View ArticleVolatility and Premiums
By Eugene F. Fama and Kenneth R. French Understanding volatility is crucial for informed investment decisions. Our paper explores the volatility of the market, size, and value premiums of the...
View ArticleDoes the Fed Control Interest Rates?
EFF: I have a new paper, "Does the Fed Control Interest Rates?". In it, I find that The Federal funds rate, FF, moves strongly toward the Fed's target, TF, but other rates show little day-to-day...
View ArticleThings I've Learned from Gene
KRF: Gene Fama has taught us a lot over the last 50 years. In this essay, I describe some of the things Gene has taught me about doing research, writing papers, and life in general. (Read the full entry)
View ArticlePortable Alpha
Portable alpha is the return from an active investment strategy that has no exposure to some index, such as the S&P 500 or the Russell 2000. It is often sold as a way to get the benefits of active...
View ArticleLong/Short Investment Strategies
Long/Short (LS) strategies buy one equity portfolio and short another. They are often sold as a way to add a premium with special diversification benefits that arise because the premium is not highly...
View ArticleQ&A: How do you decide which research papers to read?
EFF/KRF: Our strategies for choosing papers are similar. Sometimes we donât have a choice. If we agree to referee a paper or discuss it at a conference, we are certain to read it, and we read most of...
View ArticleQ&A: Can we evaluate an investment manager’s skill more quickly by...
EFF/KRF: Unfortunately, daily returns donât provide more information. (Read the full entry)
View ArticleQ&A: What can one learn from one, three, or five years of past returns...
EFF/KRF: The short answer: usually almost nothing. (Read the full entry)
View ArticleQ&A: What does it mean to say HML is redundant?
EFF/KRF: There is some confusion about the interpretation of the evidence in Fama and French (2014, âA Five-Factor Model of Expected Returnsâ) that HML is redundant for explaining average U.S....
View ArticleQ&A: Book Value
What is the validity of book value in today's environment, especially as it applies to financial firms? EFF/KRF: There is always an issue about how to "properly" measure value. But all the work we have...
View ArticleQ&A: Defined Benefit Dilemma
What suggestions do you have for defined benefit plans as equities have lost 40% to 60% of value, year-to-date, with interest rates at historical lows, and liabilities that are growing. EFF/KRF: Sorry,...
View ArticleQ&A: Prediction in Valuations?
Do valuation measures such as price/earnings or price/dividend ratios help predict future returns? Are they telling us anything now? EFF/KRF: Yes, but not with lots of confidence. The market return...
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