Eugene Fama Quotes & Sayings

Debates go on to this day about what caused the Great Depression. Economics is not very good at explaining swings in economic activity. — Eugene Fama

Markets are efficient, but there are different dimensions of risk and those lead to different dimensions of expected returns. That's what people should be concerned with in their investment decisions and not with whether they can pick stocks, pick winners and losers among the various managers delivering basically the same product. — Eugene Fama

Active management is a zero-sum game before cost, and the winners have to win at the expense of the losers. — Eugene Fama

After costs, only the top 3% of managers produce a return that indicates they have sufficient skill to just cover their costs, which means that going forward, and despite extraordinary past returns, even the top performers are expected to be only as good as a low-cost passive index fund. The other 97% can be expected to do worse. — Eugene Fama

State constitutions typically provide that the state first has to service its debt, then make it pension payments, and then pay for services. What we don't know is whether that order will be enforced. And ultimately, the busted state is going to be looking to the federal government for a bailout. Think Greece, but on a much bigger scale. — Eugene Fama

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

I don't think the Federal Reserve has any role in how high rates are right now. I don't understand why everyone is paying attention to this tapering. The Fed is using one kind of bond to buy another kind of bond. What's the big deal, and why is anyone taking the Fed seriously? — Eugene Fama

I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning. — Eugene Fama

People would be a lot more skeptical if they understood that there is an incredible amount of chance in the results that you observe for active managers. The distribution of outcomes is enormously wide-but that's exactly what you'd expect by chance with lots of active managers who hold imperfectly diversified portfolios. The really good portfolios contain a lot of really lucky picks, and the really bad portfolios contain a lot of really unlucky picks as well as some really bad ones. — Eugene Fama

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

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

After taking risk into account, do more managers than you'd see by chance outperform with persistence? Virtually every economist who studied this question answers with a resounding 'no.' — Eugene Fama

Economies typically do not function well in hyperinflation. The real value of government debt might disappear, but the economy is likely to disappear with it. — Eugene Fama

I don't believe anyone wants to hear what I have to say. — Eugene Fama

The efficient market theory is one of the better models in the sense that it can be taken as true for every purpose I can think of. For investment purposes, there are very few investors that shouldn't behave as if markets are totally efficient. — Eugene Fama

In an efficient market, at any point in time, the actual price of a security will be a good estimate of its intrinsic value. — Eugene Fama

I can't figure out why anyone invests in active management, so asking me about hedge funds is just an extreme version of the same question. Since I think everything is appropriately priced, my advice would be to avoid high fees. So you can forget about hedge funds. — Eugene Fama

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

An investor doesn't have a prayer of picking a manager that can deliver true alpha. — Eugene Fama

I'd compare stock pickers to astrologers but I don't want to bad mouth astrologers. — Eugene Fama

I take the market-efficiency hypothesis to be the simple statement that security prices fully reflect all available information. — Eugene Fama