Odd Lots Eugene Fama and David Booth on the Birth of Modern Finance
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Mar 6, 2025 
Eugene Fama, a Nobel Laureate in Economic Sciences, and David Booth, founder of Dimensional Fund Advisors, dive into the tumultuous 1970s market landscape. They discuss the Efficient Market Hypothesis, asserting that markets are generally right and investors can't easily outsmart them. The duo reflects on their influential theories, the rise of passive investing, and how social media complicates market efficiency. They also touch on modern challenges in financial research, the dynamics of stock performance, and the evolving role of growth stocks in today's economy.
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Early Market Efficiency Lesson
- Eugene Fama's first market experience involved trying to beat the market at Tufts University.
- His in-sample ideas failed out of sample, teaching him an early lesson about market efficiency.
Hand-Collected Data Thesis
- Eugene Fama wrote his thesis on efficient markets using hand-collected data from Tufts.
- This highlights the data limitations researchers faced in the early days of financial research.
Chicago's Finance Prominence
- The University of Chicago's prominence in finance stemmed from faculty interest and PhD students researching related topics.
- Key figures like Merton Miller, Harry Roberts, and access to survivorship-bias-free data fueled this growth.