May 12, 2022 Personal Wealth Rational Reminder EP 200: Prof. Eugene Fama We are so happy to bring you all our 200th episode, and who better to have on the podcast on this auspicious occasion than the legendary, Professor Gene Fama? This is one of the most jam-packed episodes we have ever recorded, with Gene providing concise and thought-provoking answers to our many, many questions. After delving into the foundations of Gene’s work and philosophy, covering market efficiency, and its competing theories, Gene entertains our queries about a wide range of ideas and models, and generously shares the decades worth of wisdom that he is so widely known for. We also find time to talk about retirement plans, inflation, cryptocurrencies, and the influence of machine learning. Towards the end of our conversation, our guest touches on some more personal ideas about productivity, his career, his partnership with Ken French, and what success means to him at this point. For a landmark episode, with a true hero of the evidence-based approach to investing, make sure not to miss this. Key Points From This Episode: The basics of market efficiency and its main implications for investors. [0:04:49]Limitations of the efficient markets model for explaining specific cases. [0:08:02]Gene’s perspective on the inelastic markets hypothesis and his interest in it for the future. [0:09:36]The anomalies that brought down the capital asset pricing model. [0:10:26]Unpacking the three-factor and five-factor asset pricing models that Fama and French created. [0:11:43]Thoughts on the Q-factor model, factor premiums, and data dredging. [0:15:43]Gene’s reflections on building data sets dating back to the 1920s. [0:17:13]The best way to estimate expected returns and expected factor premiums according to Gene. [0:19:52]Structuring portfolios and how different investors should approach this. [0:24:10]Considering international diversification for investors in Canada. [0:29:05]Further thoughts on asset pricing models. [0:32:47]The assets that are hedged against expected and unexpected inflation. [0:33:31]Gene illuminates the role of the Fed in relation to inflation. [0:36:43]Advice for typical retirees from Gene. [0:38:22]The challenges that Gene has experienced translating theory into practice. [0:40:16]Lesson from Gene’s work with Dimension Fund Advisors. [0:43:47]Gene’s reflections on his impact and having his theories implemented in practice. [0:45:32]Weighing the value and impact of behavioral finance. [0:47:53]Technology and active managers; is it any different for those aiming to achieve alpha in the current context? [0:50:46]Gene weighs in on cryptocurrencies and how his perspective might have shifted. [0:53:08]A look at the people who have had the biggest influence on Gene’s career. [1:03:05]Thoughts on productivity and making the most of periods of clear thinking. [1:03:39]Our guest’s personal definition of a successful life. [1:06:17] Subscribe to the Rational Reminder podcast Share: Facebook Twitter LinkedIn Email CIRO Advisor Report
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