October 14, 2013

Eugene F. Fama awarded Nobel Prize in Economic Sciences

Professor Fama is credited with developing the Efficient Market Hypothesis, the academic theory which explains why one should expect index funds to outperform actively managed funds over time.

Beginning in the 1960s, Eugene Fama and several collaborators demonstrated that stock prices are extremely difficult to predict in the short run, and that new information is very quickly incorporated into prices. These findings not only had a profound impact on subsequent research but also changed market practice. The emergence of so-called index funds in stock markets all over the world is a prominent example.