An Experienced View on Markets and Investing (by Fama and Litterman)
Fama, E., & Litterman, R. (2012). An Experienced View on Markets and Investing. Financial Analysts Journal, 68(6), 15-19.
Taking advantage of his numerous years in the stock market, Mr. Fama provides immensely insightful information in the above interview. With respect to the fact that he started research on stock market issues while still a student, he express a wide proficiency in matters relating to the stock market optimization. Throughout the interview, Fama explores the various features and aspects of investing in the stock market, creating a clear understanding of market efficiency in the relation of the risk returns associated with such efficiency.
In the course of the discussion, Fama makes arguments that are clearly the opposite of the traditionally established concepts. The above contradictions feature especially on CAPM. According to his argument, it makes sense to differ from the traditional concepts. The rationale for the above finds its basis that the risk environment has evolved with time and, as a result, using traditional measures cannot suffice in the presence of the modern day risk environment. The above article is quite helpful in terms of establishing the best mentality to challenge traditional principles applied in an environment that have undergone tremendous change.
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