article thumbnail

What the Great Fama-Shiller Debate Has Taught Us

Harvard Business Review

Early tests of CAPM came out reasonably well, and by the end of the 1970s Fama’s former student Michael Jensen was (in)famously declaring that “I believe there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Market Hypothesis.”.

CAPM 8
article thumbnail

Why Those Guys Won the Economics Nobels

Harvard Business Review

Back in the ‘60s, people developed the capital asset pricing model [CAPM] as a way to do that. And the theory that was available then was CAPM. And in those early tests, it seemed like market prices mostly obeyed both CAPM and the efficient market hypothesis. But everybody still uses the method that came out of CAPM.

CAPM 8