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Irving Fisher and Financial Economics: The Equity Premium Puzzle, the Predictability of Stock Prices, and Intertemporal Allocation Under Risk

Published online by Cambridge University Press:  11 June 2009

Robert W. Dimand
Robert W. Dimand
Affiliation:
Department of Economics, Brock University, St. Catharines, Ontario L2S 3A1, Canada.
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Extract

Irving Fisher is renowned as the pundit who declared in October 1929 that stock prices appeared to have reached a permanently high plateau and who, having amassed a net worth of ten million dollars in the boom of the 1920s, proceeded to lose eleven million dollars of that fortune in the crash, which, as John Kenneth Galbraith (1977, p. 192) remarked, “was a substantial sum, even for an economics professor.” Along with the Dow-Jones index, Fisher's reputation for understanding financial markets declined relative to that of Roger Babson, the stock forecaster, amateur economist, and founder of Babson College, who presciently predicted the stock market crash of autumn 1929 (and, with less prescience, the stock market crashes of 1926, 1927, and 1928, and the stock market recovery of 1930). An editorial in The Commercial and Financial Chronicle (November 9, 1929) declared of Fisher: “The learned professor is wrong as he usually is when he talks about the stock market” (quoted by Galbraith 1972, p. 151).

Type
Research Article
Information
Journal of the History of Economic Thought , Volume 29 , Issue 2 , June 2007 , pp. 153 - 166
Copyright
Copyright © The History of Economics Society 2007

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