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Vote:   | Absolutely. I have often said, and I know this will get some of your readers mad, that any pension fund manager who doesn't have the vast majority - and I mean 70% or 80% of his or her portfolio - in passive investments is guilty of malfeasance, nonfeasance or some other kind of bad feasance! |
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Vote: | Another is, if you take money out of your left pocket and put it in your right pocket, you're no richer. |
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Vote: | Arbitrage proof has since been widely used throughout finance and economics. |
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Vote: | As an economics undergraduate, I also worked on a part-time basis in Cambridge, Massachusetts, for a company that was advising customers about portfolio decisions, writing reports. |
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Vote: | At Chicago, where I am currently Robert R. McCormick Distinguished Service Professor, most of my work continued to be focussed on corporate finance until the early 1980's when I became a public director of the Chicago Board of Trade. |
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Vote: | But in practice, if often comes down to not suffering a loss as big as the huge gain you made a while ago. |
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Vote: | But remember, the M&M proposition is the beginning of wisdom; it's not the end of it. |
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Vote: | During the war years I worked as an economist first in the Division of Tax Research of the U.S. Treasury Department and subsequently in the Division of Research and Statistics of the Board of Governors of the Federal Reserve System. |
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Vote: | Everyone recognizes that's a joke because obviously the number and shape of the pieces doesn't affect the size of the pizza. And similarly, the stocks, bonds, warrants, etc., issued don't affect the aggregate value of the firm. |
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Vote: | For me, as an economist, it was frustrating to have no sense of a theory of corporate finance to tie all this material together. |
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Vote: | Franco and I were both working on the problem, but from somewhat different perspectives - he from macroeconomics and me from corporate finance. |
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Vote: | I am currently serving as a public director of the Chicago Mercantile Exchange where I had served earlier as Chairman of its special academic panel to conduct the post-mortem on the Crash of October 19-20, 1987. |
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Vote: | I can't speak for them, of course, but I believe that most economists would accept the view that, while you sometimes can make a score by sheer luck, you can't do it constantly, unless you're willing to put the resources in. |
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Vote: | I don't know how long is long enough to get rid of the influence of sample flukes. |
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Vote: | I had some of the students in my finance class actually do some empirical work on capital structures, to see if we could find any obvious patterns in the data, but we couldn't see any. |
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Vote: | I have since remarried and my wife Katherine and I divide our time between a Hyde Park townhouse during the week, and a country retreat on a working farm (though not worked by us) in Woodstock, Illinois on the weekends. |
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Vote: | I should mention that I am a member of the board of directors of Dimensional Fund Advisors. |
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Vote: | I was born in Boston, Massachusetts on May 16, 1923, the only child of Joel and Sylvia Miller. |
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Vote: | I was in economics even as an undergraduate. Stocks were part of the environment. |
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Vote: | In 1949, I decided to return to graduate school and chose Johns Hopkins University in Baltimore primarily because Fritz Machlup was then a leading member of its small, but very distinguished faculty. |
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Vote: | In 1961, I left Carnegie for the Graduate School of Business at the University of Chicago where I have been ever since except for a one-year visiting professorship at the University of Louvain in Belgium during 1966-1967. |
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Vote: | Junk bonds prove there's nothing magical in a Aaa bond rating. |
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Vote: | Like some other weekend retreaters my hobby has become brush-cutting and maintenance generally, plus a little gardening. |
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Vote: | Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't. |
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Vote: | My expertise was in public finance, particularly corporate taxation, since I had worked at the US Treasury. |
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Vote: | My first academic appointment after receiving my doctorate from Hopkins in 1952 was Visiting Assistant Lecturer at the London School of Economics for 1952-1953. |
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Vote: | My main interest, however, was in economics, not law. |
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Vote: | My research interests since then have shifted strongly towards the economic and regulatory problems of the financial services industry, and especially of the securities and options exchanges. |
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Vote: | Of course. I favor passive investing for most investors, because markets are amazingly successful devices for incorporating information into stock prices. |
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Vote: | So everybody has some information. The function of the markets is to aggregate that information, evaluate it, and get it incorporated into prices. |
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Vote: | So, I knew the tax side of corporate finance, and the economics of public finance, but not the standard finance stuff. |
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Vote: | The essence of the efficient market thing is, after all, as we in economics have always held: There's no free lunch. |
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Vote: | The untimely death in 1969 of my first wife, Eleanor, the mother of my then 3 young daughters, was a heavy personal blow. |
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Vote: | This distinction I've been making, between traders with significant non-public information and those without it - which includes most investors, including pension fund and mutual fund managers - is known as the Grossman/Stiglitz theorem. |
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Vote: | To beat the market you'll have to invest serious bucks to dig up information no one else has yet. |
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Vote: | Unlike some of my more athletic fellow laureates, however, the closest I get to recreational exercise these days is watching the Chicago Bears from my season-ticket seats (17 years now) in the south-end zone of frigid Soldier Field. |
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Vote: | Well, I say, you understand the M&M theorem, if you know why this is a joke: The pizza delivery man comes to Yogi Berra after the game and says, Yogi, how do you want this pizza cut, into quarters or eighths? And Yogi says, cut it in eight pieces. I'm feeling hungry tonight. |
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Vote: | What counts is what you do with your money, not where it came from. |
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Vote: | What happened after publication of our paper was that, for the next 40 years, people said, all right, we now know the answer to the capital structure question under ideal conditions. |
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Vote: | When I started worrying about stocks, it was the late 1930s and early 1940s and it didn't seem like a good way to make money then, either. |
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Vote: | You only need to make one big score in finance to be a hero forever. |