description Eugene Fama Overview
Eugene Fama is an American economist associated with the University of Chicago and known for research in financial economics. His work formulated influential versions of the efficient-market hypothesis, which examines how available information is reflected in asset prices, and helped develop empirical methods for studying investment returns. He shared the 2013 Nobel Memorial Prize in Economic Sciences for empirical analysis of asset prices.
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Eugene Fama ranks #14 of 253 in the Economist ranking, behind Claudia Goldin, ahead of George Akerlof.
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What does Eugene Fama's efficient-market hypothesis claim?
The hypothesis says that asset prices incorporate available information, making persistent risk-adjusted outperformance difficult. Fama discussed weak, semi-strong, and strong forms based on which categories of information prices reflect.
Does market efficiency mean stock prices are always correct?
No. It means that known information is rapidly incorporated into prices, not that every price equals an asset's ultimate fundamental value.
Why did Eugene Fama share the 2013 Nobel Prize?
Fama shared the 2013 Nobel Memorial Prize in Economic Sciences with Lars Peter Hansen and Robert Shiller. The award recognized empirical analysis of asset prices, despite important differences among their interpretations of market behavior.
What is the Fama-French three-factor model?
Developed with Kenneth French, it adds company size and value factors to the market factor used in the Capital Asset Pricing Model. The model was designed to explain patterns in stock returns that a market-only model did not capture.
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