The Joe Walker Podcast Eugene Fama — For Whom Is The Market Efficient?
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Dec 31, 2024 
Eugene Fama, a Nobel laureate and the 'father of modern finance,' discusses the nuances of market efficiency. He challenges conventional views by highlighting the impact of information asymmetry and social influences, using the GameStop saga as a case study. Fama delves into the evolution of asset pricing models and the limitations of current methods like CAPM. He also examines the housing market's complexities and the importance of effective charitable giving. The conversation integrates behavioral finance and personal beliefs, shedding light on investment strategies and market biases.
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Markets Are Not Perfectly Rational
- Eugene Fama clarifies that he doesn't believe markets are perfectly rational.
- He emphasizes the importance of examining how efficient markets are and for whom.
Models and Joint Hypothesis Problem
- Models are not real, and the joint hypothesis problem is considered deep.
- Market efficiency and asset pricing models are inseparable.
Market Efficiency Is Relative
- Market efficiency is relative to the information available to a participant.
- Those with special information, like insiders, experience less efficient markets.