YouSaid · the spoken record

Eugene Fama

lines on the record: 24
first: 2025-03-06
most recent: 2025-03-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“And I'm Joe Weisenthal. You can follow me at the stalwart. Check out the new Arro Morris documentary, Tune Out The Noise that talks about all of these things and the beginnings of modern finance. Follow our producers, Kermen Rodriguez at Kerman Armand, Dashel Bennett at Dashbot and Kale Brooks at Kale Brooks. For more odd lots content, go to Bloomberg.com slash oddlots where you have a newsletter, our episodes, and a blog. And you can chat about all of these topics, including endless circular discussions about market efficiency in our Discord.ggodlots.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and just on this one point, it is interesting to that now if someone says growth stocks, you think really big companies. And there was a time when if someone said growth stocks, you'd think about really small companies and that big companies were supposed to grow slowly. And so this is kind of what I wonder about, like these are fundamental realities of business changing and could those fundamental realities of business changing? Fundamental aspects of the stock market because we now have this era where you have gigantic companies still putting up growth numbers that in any time would be incredible.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“That I mean, that's right. I mean, that's like, you know, manager selection suffers from the exact same problem as stock selection, the out-of-sample in-sample bias. This is why, but one thing I am curious about when we are long dead and maybe the Odlots franchise is so valuable. There's like, you know, there's like new hosts of the podcast, right? Because they want to continue it. Maybe. They'll be alive long enough to say, like, oh, turns out there's no small cap premium after all. Because Gene opened up the possibility that, yeah, we all of finance and economics suffers from the tragedy of small sample sizes. Like, it's like this known phenomenon. Like the world is just getting started. Maybe one day it'll be like, actually turned out that wasn't really a thing, but it'll probably after all of our lifetimes.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, right. But can you identify the people who this is the problem, like, right? Yeah, no, this is why all these things break your brain.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, here's my this is not the weak form. There's a definition of the weak form efficient market hypothesis. What I would say is this, and I've actually given this advice to other journalists. And I think this is something that I could try to convince people of, which is that if you look at the market,”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that's the funny thing. It's like, why are we all here? I mean, this is like the existential question of everything because my interpretation of Jean's answers is basically a recurring series of yes, it's priced in. Yes, it's priced in. Yes, it's priced in. Yes, it's priced in. And so I do have this existential question about we support. This news organization that supports an industry, and I talk about this stuff all the time, and then it's like.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I think I think this is one of the most useful maxims in finance because even if it's not formally true, right? Even if there are slight variabilities, et cetera, I do think it seems very clear that the vast majority of people, including many professionals, as the statistics have borne out, can't actually generate superior returns. And so the only thing that we like, if the only use we get out of the efficient markets hypothesis is like do something else with your life than trying to beat the market, that sounds like wonderful advice that I think most people should heed.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it absolutely leads somewhere. It means that you almost certainly shouldn't try and that if you try, you will probably end up making mistakes. I mean, I think that's like a short-term.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“There's nothing if a young student came to you and said, Hey, I'm looking at 86, you might not want to dive into something new, but there's nothing. He's like, oh, yeah, I'm sort of curious about that. You should try to pursue a paper. There's nothing that comes to mind that sort of you would suggest a young researcher make a stab at.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“I could find some chart that shows that absolutely for years and years and years there's the case. And then, of course, that's totally made up. And so then it doesn't work. And we've seen this explosion of other factors. Two of your three factors, but people are coming up with all kinds of factors and you've added factors, et cetera. When do you say a factor loses legitimacy? It's like, you know what? This was p-hacked. This turned out to be, it turned out that actually it doesn't really work out of sample after a long enough time. And in my mind, I am going back to, say, value versus growth or small versus big here. Is there a period at which if growth keeps out performing value, you say, actually, that's not a real sustainable factor. It's not mean reverting. And this was the appearance of these excess returns was a function of limited sample size.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“You started this conversation by talking about your initial problems, which is that when you're identifying historical patterns, it's easy to find something that works in the sample and then it doesn't work out of sample. So I could probably come up with some story that tickers that start with the letter P tend to outperform on Tuesdays.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Basically, the idea that at any given point you will be compensated for the risks of smaller, less liquid stocks, that's not necessarily a permanent characteristic of the market.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Just to press on this point further, small companies are always going to have certain types of risks. Low liquidity stocks are always going to have certain types of risks that don't exist in high liquidity stocks. But when you think about these factors, these do not strike you as iron laws of how markets work that you will at some point get compensated for taking on these risks into your portfolio.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Something that I'm really interested in when it comes to markets, particularly, I would say over the last 15 years since the Great Financial Crisis, small caps have certainly not provided any sort of superior risk-adjusted returns to large caps, and you can see that on basically any chart. And growth companies year after year, you know, by the traditional metrics of what we call growth and value. And I know people sometimes try to redefine these to allow them to put NVIDIA in their value fund. Clearly, growth has been outperforming for a long time. And part of the reason it seems very obvious to me that these big tech stocks have done so well is because the companies have all done extraordinarily well in beating earnings expectations year after year after year. Does this pose a problem for a sort of factor-oriented investor when the fundamental”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Retirement funds with every paycheck. So I'm already getting time diversification. Are there fundamental questions in portfolio construction that you think need to be rethought? If over the next 30 years before I can retire or 25 years maybe, like if almost everyone thinks it's certain that stocks will outperform bonds, why am I holding bonds?”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to go back to this idea of even if markets are efficient, there still are risk premium and certain asset classes are expected to go up more than others due to people wanting to avoid drawdowns, et cetera. You know, like, I don't make many active decisions. I'm like a good, like, I follow what I read in the news and I have some stocks. And, you know, I'd probably have some treasuries and some fund or something like that. And I don't pay attention to it much. Looking back, though, at historical trends in portfolio construction, I sometimes wonder why should anyone own bonds? Because you say hardly anyone just owns stocks. And that seems to be objectively true. But I wonder if, like, is there a reason to question some of this dogma of like why, like, if I'm not going to retire in 30 years, do I care about, you know, I'm already diversifying over time because I make an allocation to my”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“It seems fairly clear that you can sort of sense like we're in some sort of mania and even knowing that fact and everyone agreeing on that fact. In fact, to try to establish that fact is often a good recipe for losing all your money. If you're short it or losing all your clients, if you're avoiding it. So I certainly take that point. Let me press further though. A lot of your research and this idea of market efficiency, but you've also worked on factors that seem over time historically to outperform. And so the idea of small companies outperforming big companies or value companies outperforming over time, dimensional has funds that aren't just the pure market portfolio reconcile the existence of that with the idea of efficient market.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“This gets to like a question that I've asked before, and I'm now thrilled to ask it to you, which is why does the financial industry exist if markets are efficient? Because there are a lot of people that collect very big paychecks from some notion that they can deliver better returns than someone else to their clients. If markets are efficient, at least to most people in the industry, why do we have this industry?”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
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2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, this is exactly what I wanted to ask, and I think it sort of speaks to a big theoretical question. Let's say part of good investing is having good data. Like if you have to collect the data by hand, you're already going to probably knock out 99.9% of the people who have interest because I wouldn't do it because my risk get really tired really fast and my handwriting is garbage so I wouldn't even be able to read what I had written in the graph paper etc A lot of things that we take for granted about investing today, including measuring the performance of an index are things that literally take a few keystrokes or less on a Bloomberg terminal today. And I'm curious like when you think about like generating superior returns over time how much of an edge was that to just be willing to do the Hard work of collecting data”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious from your perspective how did this interest you as an intellectual field of study and we'll get into some of the specific and sort of groundbreaking contributions to what many people now consider absolute truths to how the market worked but this idea some of your ideas like why what what attracted you to the study of markets and some of your early research”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“That's cool. We've done an episode with Dimensionals co CEO O'Reilly. Why don't you talk to us a little bit about the partnership with the two of you for people who are not familiar, for people who are going to be watching the film for the first time, the two of you have been working together for literally decades and really two of the biggest names truly in the history of finance. What is the sort of short version of... Sort of intellectual partnership and how this firm dimensional came about.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“And yet there appears to be a financial industry that must on some level be premised on the idea that it's not priced in, but I always assume that it's all priced in. And so maybe we'll finally get an answer to this question.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm really excited because I'm finally going to have a chance to ask is it all priced in? Because this is my core belief about markets that it's like, nope, it's all priced in.”
2025-03-06 · Odd Lots · Eugene Fama and David Booth on the Birth of Modern Finance · IDENTIFIED FROM THE TRANSCRIPT · source