Myth of the Rational Market [Hardcover]

Justin Fox (Author)

Book Description

Publication Date: January 18, 2010

Chronicling the rise and fall of the efficient market theory and the century-long making of the modern financial industry, Justin Fox's "The Myth of the Rational Market" is as much an intellectual whodunit as a cultural history of the perils and possibilities of risk. The book brings to life the people and ideas that forged modern finance and investing, from the formative days of Wall Street through the Great Depression and into the financial calamity of today. It's a tale that features professors who made and lost fortunes, battled fiercely over ideas, beat the house in blackjack, wrote bestselling books, and played major roles on the world stage. It's also a tale of Wall Street's evolution, the power of the market to generate wealth and wreak havoc, and free market capitalism's war with itself. The efficient market hypothesis - long part of academic folklore but codified in the 1960s at the University of Chicago - has evolved into a powerful myth. It has been the maker and loser of fortunes, the driver of trillions of dollars, the inspiration for index funds and vast new derivatives markets, and the guidepost for thousands of careers. The theory holds that the market is always right, and that the decisions of millions of rational investors, all acting on information to outsmart one another, always provide the best judge of a stock's value. That myth is crumbling. Celebrated journalist and columnist Fox introduces a new wave of economists and scholars who no longer teach that investors are rational or that the markets are always right. Many of them now agree with Yale professor Robert Shiller that the efficient markets theory 'represents one of the most remarkable errors in the history of economic thought'. Today the theory has given way to counterintuitive hypotheses about human behavior, psychological models of decision making, and the irrationality of the markets. Investors overreact, underreact, and make irrational decisions based on imperfect data. In his landmark treatment of the history of the world's markets, Fox uncovers the new ideas that may come to drive the market in the century ahead.

Editorial Reviews

Review

Praise for the US edition: "In this book, Justin Fox, the economics columnist for Time magazine, provides a lucid, lively and learned account of the rise and fall of the theory." - Barrons, US "A must-read for anyone interested in the markets, our economy or government, this dense but spellbinding work brings modern finance and economics to life." - Publisher's Weekly, US "Justin Fox's new book, - is - an engaging history of what might be called the rise and fall of the efficient market hypothesis." - The New York Times, US "Fox - covers ground that ranges from the notion of market efficiency - to the panoply of models for measuring risk and pricing derivatives that came with it. This book - is impressively broad and richly researched." - Financial Times, US "With "The Myth of the Rational Market" Mr. Fox has produced a valuable and highly readable history of risk and reward." - The Wall Street Journal, US "Justin Fox's description of how the idea evolved and conquered is fascinating and entertainingly told. Mr Fox has written a worthy successor to "Capital Ideas", the late Peter Bernstein's 1990s classic on the emergence of the rational-market myth: bang up-to-date; alas, without the happy ending" - The Economist, US "...a rich history of the world's most seductive investing idea...the book chronicles the rise of rational market theory over the decades and captures the sizzle and pop of the intellectual debate..." - Bloomberg, US "Fox...weaves a fascinating historical narrative" - The Washington Post, US "Do we really need yet another book about the financial crisis? Yes, we do - because this one is different ...a must-read" - New York Times

About the Author

Justin Fox is the business and economics columnist for Time magazine. Previously an editor and writer at Fortune, he appears frequently on CNN and CNBC and has made exactly one appearance on 'The Daily Show' with Jon Stewart. He lives in New York with his wife and son. www.byjustinfox.com

Product Details

• Hardcover: 400 pages
• Publisher: Harriman House (January 18, 2010)
• Language: English
• ISBN-10: 1906659699
• ISBN-13: 978-1906659691
• Product Dimensions: 9.1 x 6.3 x 1.4 inches
• Shipping Weight: 1.7 pounds
• Average Customer Review: 2.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #1,891,881 in Books (See Top 100 in Books)