Malkiel

Definition

Burton G. Malkiel is an American economist and author of the influential book 'A Random Walk Down Wall Street.' He is a proponent of the efficient-market hypothesis, which argues that asset prices fully reflect all available information.

5 Must Know Facts For Your Next Test

1. Malkiel's book 'A Random Walk Down Wall Street' argues that stocks follow a random walk and are thus unpredictable.
2. He advocates for passive investing strategies like index funds over active management.
3. Malkiel's work supports the efficient-market hypothesis (EMH), which posits that it's impossible to consistently achieve higher returns than average market returns on a risk-adjusted basis.
4. He served as a member of the Council of Economic Advisers and was also a long-time professor at Princeton University.
5. Malkiel's theories have significantly influenced modern investment strategies and the proliferation of low-cost index funds.

Review Questions

• What is Burton Malkiel's stance on the predictability of stock prices?
• What investment strategy does Malkiel advocate for, and why?
• How has Malkiel’s work impacted modern financial markets?

Related terms

Efficient-Market Hypothesis (EMH): A theory stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher than average returns.

Index Fund: A type of mutual fund designed to replicate the performance of a specific index, such as the S&P 500.

Passive Investing: An investment strategy that seeks to maximize returns by minimizing buying and selling activities, often through holding index funds.