Burton Malkiel
Encyclopedia
Burton Gordon Malkiel is an American
economist
and writer
, most famous for his classic finance
book A Random Walk Down Wall Street
(now in its 10th edition, 2011). He is a leading proponent of the efficient market hypothesis
, which contends that prices of publicly traded assets reflect all publicly available information, although he has also pointed out that some markets are evidently inefficient, exhibiting signs of non-random walk
.
Malkiel in general supports buying and holding index funds as the most effective portfolio-management strategy, but does think it is viable to actively manage "around the edges" of such a portfolio, as financial markets are not totally efficient.
of economics
at Princeton University
, and is a two-time chairman of the economics department there. He served as a member of the Council of Economic Advisers
(1975–1977), president of the American Finance Association
(1978), and dean of the Yale School of Management
(1981–1988). He also spent 28 years as a director of the Vanguard Group
.
In 1949, Malkiel graduated from Boston Latin School
, and went on to receive his bachelor's degree (1953) and his MBA
(1955) from Harvard University
. He originally went into the business world, but had always had an interest in academic economics and eventually earned his doctorate (1964) from Princeton University
. He married his first wife, Judith Atherton Malkiel, in 1954; they had one son, Jonathan. After Judith Malkiel's death in 1987, Burton Malkiel married his second wife, Nancy Weiss, in 1988. (Nancy Weiss Malkiel has been Dean of the College of Princeton University since 1987.) He served as a first lieutenant in the United States Army from 1955 to 1958. He also serves on the advisory panel of Robert D. Arnott
's investment management firm, Research Affiliates.
Malkiel discussed, and discarded, the hypothesis that the discount is due to the management fees. The argument of the paper is that since management fees are generally constant, this view would not explain changes in the size of the discount during the life-cycle of a fund. Furthermore, if the discount resulted from management fees, it should be related (Malkiel contended) to interest rates, yet the data does not support any such tie.
On July 22, 2005, Malkiel retired from 28 years of service as a director of the Vanguard Group
and trustee of Vanguard Mutual funds, yet remains closely affiliated with Vanguard due to Vanguard's similar investment philosophies. In A Random Walk Down Wall Street, he frequently references Vanguard.
Malkiel recently co-authored a book on, and has spoken extensively about, investment opportunities in China
. He is currently Chief Investment Officer of AlphaShares Investments, "an investment management firm dedicated to providing investors with strategies and products that allow them to participate in China’s economic boom." AlphaShares has licensed indices to Claymore Securities as the basis for two China oriented index exchange traded funds (ETF's). Malkiel is a strong believer that, despite the uncertainties surrounding China (rural unrest, overinvestment/bubbles, non-democratic government) China is a viable source of investment opportunities.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
and writer
Writer
A writer is a person who produces literature, such as novels, short stories, plays, screenplays, poetry, or other literary art. Skilled writers are able to use language to portray ideas and images....
, most famous for his classic finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
book A Random Walk Down Wall Street
A Random Walk Down Wall Street
A Random Walk Down Wall Street, written by Burton Malkiel, a Princeton economist, is an influential book on the subject of stock markets which introduced the random walk hypothesis. Malkiel argues that asset prices typically exhibit signs of random walk and that one cannot consistently outperform...
(now in its 10th edition, 2011). He is a leading proponent of the efficient market hypothesis
Efficient market hypothesis
In finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient". That is, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.There are...
, which contends that prices of publicly traded assets reflect all publicly available information, although he has also pointed out that some markets are evidently inefficient, exhibiting signs of non-random walk
Random walk hypothesis
The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus the prices of the stock market cannot be predicted. It is consistent with the efficient-market hypothesis....
.
Malkiel in general supports buying and holding index funds as the most effective portfolio-management strategy, but does think it is viable to actively manage "around the edges" of such a portfolio, as financial markets are not totally efficient.
Life and career
Malkiel is the Chemical Bank Chairman’s professorProfessor
A professor is a scholarly teacher; the precise meaning of the term varies by country. Literally, professor derives from Latin as a "person who professes" being usually an expert in arts or sciences; a teacher of high rank...
of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
at Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....
, and is a two-time chairman of the economics department there. He served as a member of the Council of Economic Advisers
Council of Economic Advisers
The Council of Economic Advisers is an agency within the Executive Office of the President that advises the President of the United States on economic policy...
(1975–1977), president of the American Finance Association
American Finance Association
The American Finance Association is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939...
(1978), and dean of the Yale School of Management
Yale School of Management
The Yale School of Management is the graduate business school of Yale University and is located on Hillhouse Avenue in New Haven, Connecticut, United States. The School offers Master of Business Administration and Ph.D. degree programs. As of January 2011, 454 students were enrolled in its MBA...
(1981–1988). He also spent 28 years as a director of the Vanguard Group
The Vanguard Group
The Vanguard Group is an American investment management company based in Malvern, Pennsylvania, that manages approximately $1.6 trillion in assets. It offers mutual funds and other financial products and services to individual and institutional investors in the United States and abroad. Founder...
.
In 1949, Malkiel graduated from Boston Latin School
Boston Latin School
The Boston Latin School is a public exam school founded on April 23, 1635, in Boston, Massachusetts. It is both the first public school and oldest existing school in the United States....
, and went on to receive his bachelor's degree (1953) and his MBA
Master of Business Administration
The Master of Business Administration is a :master's degree in business administration, which attracts people from a wide range of academic disciplines. The MBA designation originated in the United States, emerging from the late 19th century as the country industrialized and companies sought out...
(1955) from Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
. He originally went into the business world, but had always had an interest in academic economics and eventually earned his doctorate (1964) from Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....
. He married his first wife, Judith Atherton Malkiel, in 1954; they had one son, Jonathan. After Judith Malkiel's death in 1987, Burton Malkiel married his second wife, Nancy Weiss, in 1988. (Nancy Weiss Malkiel has been Dean of the College of Princeton University since 1987.) He served as a first lieutenant in the United States Army from 1955 to 1958. He also serves on the advisory panel of Robert D. Arnott
Robert D. Arnott
Robert D. Arnott is an American entrepreneur, investor, editor and writer who focuses on articles about quantitative investing. He is the father of Richard Wiles-Arnott, Sydney Arnott, and Robin Arnott. He edited the CFA Institute's Financial Analysts Journal from 2002–2006, and has edited three...
's investment management firm, Research Affiliates.
Notable works
In addition to several books, he has also written influential articles, including "The Valuation of Closed-End Investment Company Shares," Journal of Finance (1977). This article discussed the puzzle of why closed-end fund companies typically trade at market valuations lower than the net value of their assets. If net asset value and market capitalization are only two ways of measuring the same thing, then why is there a consistent difference between them?Malkiel discussed, and discarded, the hypothesis that the discount is due to the management fees. The argument of the paper is that since management fees are generally constant, this view would not explain changes in the size of the discount during the life-cycle of a fund. Furthermore, if the discount resulted from management fees, it should be related (Malkiel contended) to interest rates, yet the data does not support any such tie.
On July 22, 2005, Malkiel retired from 28 years of service as a director of the Vanguard Group
The Vanguard Group
The Vanguard Group is an American investment management company based in Malvern, Pennsylvania, that manages approximately $1.6 trillion in assets. It offers mutual funds and other financial products and services to individual and institutional investors in the United States and abroad. Founder...
and trustee of Vanguard Mutual funds, yet remains closely affiliated with Vanguard due to Vanguard's similar investment philosophies. In A Random Walk Down Wall Street, he frequently references Vanguard.
Malkiel recently co-authored a book on, and has spoken extensively about, investment opportunities in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
. He is currently Chief Investment Officer of AlphaShares Investments, "an investment management firm dedicated to providing investors with strategies and products that allow them to participate in China’s economic boom." AlphaShares has licensed indices to Claymore Securities as the basis for two China oriented index exchange traded funds (ETF's). Malkiel is a strong believer that, despite the uncertainties surrounding China (rural unrest, overinvestment/bubbles, non-democratic government) China is a viable source of investment opportunities.
Partial bibliography
- Burton G. Malkiel: A Random Walk Down Wall Street. The Best Investment Tactic for the New Century, Norton & Company, New York 2011 ISBN 978-0-393-32040-4