I’ve posted Entry #292 to my weekly Valuation-Informed Indexing column at the Value Walk site.It’s called Our Political Beliefs Inform What We See in the Investing Research.
Juicy Excerpt: I suspect that Fama is entranced by the spell of the Rational Man concept. I don’t think that investors behave rationally but the full reality here is that Fama’s belief that they do has generated many powerful and genuine insights. One can hardly find too much fault in him for allowing himself to take the basically good idea a bit too far. My guess (again, it’s not possible to offer more than surmises here) is that Fama has a hard time crediting the idea that it is emotion that drives stock price changes. Shilled’s research shows that to be so. In my mind it is clear as clear can be that this is the case. But for someone who believes what libertarians believe (as Fama might), that’s a hard sell.