The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
by Fox, JustinEdition: Reprint
Format: Paperback
Pub. Date: 1900-01-01
Publisher(s): HarperCollins Publications
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Summary
"TIME" economics columnist Fox describes the rise and fall of the world's most influential investing idea--the efficient markets theory--and its replacement with behavioral economics in a lively history of ideas.
Author Biography
Justin Fox is editorial director of the Harvard Business Review Group, and a contributor to Time magazine and PBS's Nightly Business Report. Previously, he was a columnist at Time and an editor and writer at Fortune. He lives in Cambridge, Massachusetts, with his wife and son.
Table of Contents
| Introduction: It Had Been Working So Exceptionally Well | p. xi |
| Early Days | |
| Irving Fisher Loses His Briefcase, and Then His Fortune | p. 3 |
| The first serious try to impose reason and science upon the market comes in the early decades of the twentieth century. It doesn't work out so well. | |
| A Random Walk from Fred Macaulay to Holbrook Working | p. 26 |
| Statistics and mathematics begin to find their way into the economic mainstream in the 1930s, setting the stage for big changes to come. | |
| The Rise, of the Rational Market | |
| Harry Markowitz Brings Statistical Man to the Stock Market | p. 47 |
| The modern quantitative approach to investing is assembled out of equal parts poker strategy and World War II gunnery experience. | |
| A Random Walk from Paul Samuelson to Paul Samuelson | p. 60 |
| The proposition that stock movements are mostly unpredictable goes from intellectual curiosity to centerpiece of an academic movement. | |
| Modigliani and Miller Arrive at A Simplifying Assumption | p. 75 |
| Finance, the business school version of economics, is transformed from a field of empirical research and rules of thumb to one ruled by theory. | |
| Gene Fama Makes the Best Proposition in Economics | p. 89 |
| At the University of Chicago's Business School in the 1960s, the argument that the market is hard to outsmart grows into a conviction that it is perfect. | |
| The Conquest of Wall Street | |
| Jack Bogle Takes on the Performance Cult (And Wins) | p. 111 |
| The lesson that maybe it's not even worth trying to beat the market makes its circuitous way into the investment business. | |
| Fischer Black Chooses to Focus on the Probable | p. 132 |
| Finance scholars figure out some ways to measure and control risk. More important, they figure out how to get paid for doing so. | |
| Michael Jensen Gets Corporations to Obey the Market | p. 153 |
| The efficient market meets corporate America. Hostile takeovers and lots of talk about shareholder value ensue. | |
| The Challenge | |
| Dick Thaler Gives Economic Man A Personality | p. 175 |
| Human nature begins to find its way back into economics in the 1970s, and economists begin to study how markets sometimes fail. | |
| Bob Shiller Points Out the Most Remarkable Error | p. 191 |
| Some troublemaking young economists demonstrate that convincing evidence for financial market rationality is sadly lacking. | |
| Beating the Market with Warren Buffett and Ed Thorp | p. 211 |
| Just because professional investors as a group can't reliably outperform the market doesn't mean that some professional investors can't. | |
| Alan Greenspan Stops A Random Plunge Down Wall Street | p. 227 |
| The crash of 1987 exposes big flaws in the rational finance view of risk. But a rescue by the Federal Reserve averts a full reexamination. | |
| The Fall | |
| Andrei Shleifer Moves Beyond Rabbi Economics | p. 247 |
| The efficient market's critics triumph by showing why irrational market forces can sometimes be just as pervasive as the rational ones. | |
| Mike Jensen Changes His Mind About the Corporation | p. 265 |
| The argument that financial markets should always set the priorities-for corporations and for society-loses its most important champion. | |
| Gene Fama and Dick Thaler Knock Each Other Out | p. 287 |
| Where has the debate over market rationality ended up? In something more than a draw and less than a resounding victory. | |
| Epilogue: The Anatomy of A Financial Crisis | p. 309 |
| Afterword | p. 323 |
| Cast of Characters | p. 329 |
| Acknowledgments | p. 337 |
| A Note on Sources | p. 339 |
| Notes | p. 341 |
| Index | p. 379 |
| Table of Contents provided by Ingram. All Rights Reserved. |
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