Last week the 2013 Nobel Prize in Economics was awarded by the Royal Swedish Academy of Sciences to Eugene Fama, along with two others, for laying “the foundation for the current understanding of asset prices.”
Fama, 74, is known among economists as the “father of modern finance” and is a professor at the University of Chicago. In the mid-1960s he propounded theories that argued that stock-price movements are unpredictable and follow a “random walk”, making it impossible for any investor, even a professional, to consistently gain an advantage. He also showed in later work that so called value and small-cap stocks have higher returns than growth stocks.
Fama’s research and analysis has been one of the founding tenets of Stewart Partners’ investment philosophy since our Chairman, Nigel Stewart, met Eugene 20 years ago.
Eugene is a board member of Dimensional Fund Advisors (DFA) and a consultant for DFA’s Fixed Income and Value strategies. These form core components of our clients investment portfolios.
We wish to congratulate Dr Fama on being awarded the 2013 Nobel Prize in Economics.