Articles
-
The Nobel Prize’s dumbbell move
By marketwatch.com
If anyone ever doubted that the Nobel Prize for Economics was a farce, Monday’s announcement of the latest winners should put the matter to rest.
To honor their contributions to the understanding of markets and asset prices, the Nobel committee has awarded prizes to three American economists.
One is the University of Chicago’s Eugene Fama, who says the stock market is rational. The other is Yale’s Robert Shiller, who basically (I exaggerate) says it isn’t. (The third prize went to Fama’s Chicago colleague Lars Peter Hansen, an econometrician).
Fama questions whether “bubbles” exist. Shiller says they are common, and easy to see. Fama said U.S. house prices weren’t in a bubble in 2006, even in retrospect. Shiller warned that they were—even before the crash. (He also correctly warned of a stock-market bubble in the late 1990s).
Fama thinks you should never try to time the market, because future returns are completely unpredictable and stocks will follow a “random walk.”
Shiller says that for most of the past century or more you could have timed the market quite easily. All you really had to do was to invest in the stock market when stocks were cheap (when measured against the previous 10 years’ earnings).
People who did that usually earned excellent returns over the next 10 years, he found. Meanwhile, those who invested when the stock market was expensive on this measure usually earned poor returns.
Shiller’s analysis, which includes data publicly available on the web, actually offers investors the most credible system which exists for “timing” the market.
In other words, the Nobel committee has awarded its prize to the man best known for saying you can’t beat the market, and at the same time to the man best known for saying you can.
I have a simple question for the Nobel committee.
Are you kidding?
Read full article
-
Authorized Person for MEX NEPAL
Mob: +977 9856030634 -
Biratnagar Branch Manager
Mob: +977 9852033934 -
Our Clearing Member
-
Our Banking Partners
-
-
-
