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Welcome to Step 2, where the evolution of
modern finance is discussed. Peter L. Bernstein provides the
inspiration for this step in his two books, Capital Ideas,
The Improbable Origins of Modern Wall Street and Against the
Gods, The Remarkable Story of Risk. Both are recommended as
supplemental sources to this 12-Step Program.
A review of the collective research of these
Nobel Prize recipients and other financial academics shows
a comparison between what the average active investor understands
about the risks and rewards of the global equities market
and the academics’ three hundred and forty-five years
of unbiased, rigorous, and empirical research. When active
investors can accept the fact that there is a vast difference,
then they are on the road to recovery. Although this step
is titled Nobel Laureates, numerous academics who have researched
the stock market but did not get a Nobel Prize will also be
discussed. These researchers, including the Nobel Laureates,
continue to build and improve on the research of others.
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" Sooner
than I dared expect, my explicit prayer has
been answered. There is coming to market...
something called the First Index Investment
Trust.... offering extremely low portfolio
turnover; and best of all, giving the broadest
diversification needed to maximize mean return
with minimum portfolio variance and volatility."
Newsweek Magazine,
August 1976, also
"It is not
easy to get rich in Las Vegas, at Churchill
Downs, or at the local Merrill Lynch office.
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Professor Paul A. Samuelson, Massachusetts
Institute of Technology, Economist, Nobel
Laureate in Economics, 1970 |
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" Most of my investments are
in equity index funds." BusinessWeek
and "Why pay people to gamble with your money?
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Question: So investors shouldn't
delude themselves about beating the market?
Answer: "They're just not going to do it.
It's just not going to happen." |
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Question: I wonder if I might ask you, ...how
do you think people should invest for the
future...? Should they buy index funds? Answer:
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! There's just no
sense for most of them to have anything but
a passive investment policy. |
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How is the Nobel Prize in Economic Sciences
Awarded?
The Nobel Prize is perhaps the
most globally recognized honor in each of the fields in which
it is presented. To find out what a challenge it is to obtain,
you can go to the official web site, or
keep reading! The Nobel Internet archive
is also a great resource.
Each year the category committees
send individual proposals to thousands of scientists, members
of academies, and university professors in numerous countries,
asking them to nominate Nobel Prize candidates for the coming
year. Those considered competent by these committees to submit
nominations are chosen in such a way that as many countries
and universities as possible will be represented.
Nominations received by each
committee are then evaluated with the help of specially appointed
experts. When the committees have made their selection among
the nominated candidates and have presented their recommendations
to the prize awarding institutions, a vote is taken for the
final choice of Laureates.
The Bank of Sweden Prize in Economic
Sciences in Memory of Alfred Nobel is awarded at the Prize
Awarding Ceremony at the Concert Hall in Stockholm, Sweden,
on every December 10th, the anniversary of Alfred Nobel's
death.
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