May 12, 2022
We are so happy to bring you all our 200th episode, and who
better to have on the podcast on this auspicious occasion than the
legendary, Professor Gene Fama? This is one of the most jam-packed
episodes we have ever recorded, with Gene providing concise and
thought-provoking answers to our many, many questions. After
delving into the foundations of Gene's work and philosophy,
covering market efficiency, and its competing theories, Gene
entertains our queries about a wide range of ideas and models, and
generously shares the decades worth of wisdom that he is so widely
known for. We also find time to talk about retirement plans,
inflation, cryptocurrencies, and the influence of machine learning.
Towards the end of our conversation, our guest touches on some more
personal ideas about productivity, his career, his partnership with
Ken French, and what success means to him at this point. For a
landmark episode, with a true hero of the evidence-based approach
to investing, make sure not to miss this.
Key Points From This Episode:
- The basics of market efficiency and its main implications for
- Limitations of the efficient markets model for explaining
specific cases. [0:08:02]
- Gene's perspective on the inelastic markets hypothesis and his
interest in it for the future. [0:09:36]
- The anomalies that brought down the capital asset pricing
- Unpacking the three-factor and five-factor asset pricing models
that Fama and French created. [0:11:43]
- Thoughts on the Q-factor model, factor premiums, and data
- Gene's reflections on building data sets dating back to the
- The best way to estimate expected returns and expected factor
premiums according to Gene. [0:19:52]
- Structuring portfolios and how different investors should
approach this. [0:24:10]
- Considering international diversification for investors in
- Further thoughts on asset pricing models.
- The assets that are hedged against expected and unexpected
- Gene illuminates the role of the Fed in relation to inflation.
- Advice for typical retirees from Gene.
- The challenges that Gene has experienced translating theory
into practice. [0:40:16]
- Lesson from Gene's work with Dimension Fund Advisors.
- Gene's reflections on his impact and having his theories
implemented in practice. [0:45:32]
- Weighing the value and impact of behavioral finance.
- Technology and active managers; is it any different for those
aiming to achieve alpha in the current context?
- Gene weighs in on cryptocurrencies and how his perspective
might have shifted. [0:53:08]
- A look at the people who have had the biggest influence on
Gene's career. [1:03:05]
- Thoughts on productivity and making the most of periods of
clear thinking. [1:03:39]
- Our guest's personal definition of a successful life.