Investing can be tricky. Dispelling the Myths of Traditional Investing is not as difficult as one may think. What is difficult is cleansing the mind of the brainwashing that has gone on for years in the media. What should one believe any longer when it comes to planning for the future using the market as a means to creating wealth – easy, the facts.
Our philosophy that Free Markets work is a fundamental core belief. Free Market is a market in which prices of goods and services are arranged completely by the mutual consent of sellers and buyers.
Modern Portfolio Theory (MPT) proposes how rational investors will use diversification to optimize their portfolios, and how a risky asset should be priced. The basic concepts of the theory are Markowitz diversification, the efficient frontier, capital asset pricing model, the alpha and beta coefficients, the Capital Market Line and the Securities Market Line.
Free Market Investing is the result of the work of many brilliant individuals. The concepts developed and proven by the best and brightest economic and academic minds have created the intellectual framework with which money managers evaluate the risks and rewards of their investments.
Eugene F. Fama, University of Chicago, Robert R. McCormick Distinguished Service Professor of Finance Professor. He is credited with founding both the random walk hypothesis and the efficient market hypothesis. He has published numerous articles and worked in collaboration with Kenneth French to define the Three-factor Model. Considered a giant in the field of financial economics, he is among the world’s most cited academics. Research activities focus on theoretical and empirical work on investments; price formation in capital markets; corporate finance, and the economics of the survival of organizational forms. Dr. Fama also serves as Director of Research at Dimensional Fund Advisors.
Harry M. Markowitz. Nobel Prize Winner, 1990. As a graduate student in economics at the University of Chicago, Dr. Markowitz first studied portfolio design and risk reduction in his paper, “Portfolio Selection, ” published in the 1952 Journal of Finance. Thirty-eight years later, he shared the Nobel Prize in Economic Sciences with Merton Miller and William Sharpe for developing the theory of portfolio choice, one of the primary concepts crucial to the development of Modern Portfolio Theory.
William F. Sharpe. STANCO 25 Professor of Finance, Emeritus at Stanford University’s Graduate School of Business. Sharpe was one of the originators of the capital asset pricing model (the device that gave Wall Street the concept of the “beta”), developed the Sharpe Ratio for investment performance analysis, the binomial method for the valuation of options, the gradient method for asset allocation optimizations, and returns-based style analysis for evaluating the style and performance of investment funds. He has written six books and received the Nobel Prize in Economic Sciences in 1990.
Merton H. Miller, (1923-2000). Nobel Prize Laureate, 1990. Miller’s illustrious academic career started at Harvard, where he graduated in 1943. He worked at the U.S. Treasury and Federal Reserve, then earned his Ph.D. from Johns Hopkins University in 1952. He taught at Carnegie Tech, where he met Franco Modigliani (Nobel Prize winner 1985) and together they made economic history with the”M&M theorem.” Miller’s work on the effect of firms’ capital structure and dividend policy on market price along with the work of Markowitz and Sharpe contributed to Modern Portfolio Theory, and earned him the Nobel Prize in Economic Sciences in 1990.
Myron S. Scholes, Stanford University, Frank E. Buck Professor of Finance at the Graduate School of Business and Senior Research Fellow at the Hoover Institution. Scholes earned his Ph.D.in 1969 from the University of Chicago, and became heavily involved with the Center for Research in Security Prices (CRSP). He has written and published many articles on his own and in collaboration with other highly regarded academics, including Merton Miller, Fischer Black, and the man who shared his 1997 Nobel Prize in the Economic Sciences, Robert C. Merton. Merton and Scholes were recognized for their work on the derivative pricing formula. Scholes also holds honorary doctorate degrees from three universities: University of Paris-Dauphine, McMaster University, and Katholieke Univesiteit Leuven.
Kenneth R. French is the NTU Professor of Finance at MIT’s Sloan School of Management. He is an expert on the behavior of security prices and investment strategies. His recent research focuses on tests of asset pricing models, the trade-off between risk and return in domestic and international financial markets, the cost of capital, and the relation between capital structure and firm value. French is a Research Associate at the National Bureau of Economic Research, an Advisory Editor of the Journal of Financial Economics, an Associate Editor of the Review of Financial Studies, and a past director of the American Finance Association. He has co-authored numerous papers and articles with Eugene Fama. In 1990, they sought to determine what sources of risk the market systematically rewards with higher returns. The result of their research is known as the Three-factor Model. He is also a key advisor for Dimensional Fund Advisors.
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