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. So when Fama started, the cross-sectional model was the CAPM, and for the time series people just said well let’s just assume that risks don’t change over time, so whatever risk adjustment there is it’s the same today, tomorrow, and thereafter. Instead what he says is let’s have financial innovation that is actually helpful.