famous financial experts

famous financial experts

Exploring the Contributions of Famous Financial Experts

1. Introduction to the World of Finance

Welcome to the fascinating world of finance! Finance, meaning money or funds, is such an essential part of our daily lives. Without money, achieving some of our goals would be near to impossible. This is exactly why finance experts, academics, and even your parents try to teach you about savings, investments, money management, and risk taking. These experts help us to understand money, how it moves in our societies, and how it moves in the world at large.

Some famous contributors to the field of finance include people like Warren Buffett, the world’s richest man, who has merged together true wealth and happiness. There are many more men and women such as Chartered Financial Analyst (CFA), Sir John Marks Templeton, who demonstrate real wisdom in the way they handle their own wealth as well as those of the families, foundations, or institutions that they work within. Financial experts like Dr. Maya Hu-Chan are gurus who passionately guide and coach wealthy families and other figures of great financial means. They help them protect, nourish, take care of, and grow both their wealth and their happiness.

2. Key Theories and Concepts in Finance

In this chapter, foundational concepts within the financial management profession will be examined. As such, an answer to the questions of “What do finance professionals believe and why do they believe?” will be articulated. In the examination, the evolution from accounting theory to finance theory, an analysis of agency theory will be needed. In the next section, the Modigliani-Miller (M-M) debates will be revisited. The remainder of the chapter will examine utility theory, the capital asset pricing model (CAPM), portfolio theory, and the efficient markets hypothesis (EMH).

Key Concepts: Thorough examination of what financial professionals believe and why, agency theory application, M-M debates revisited, review of key financial concepts and theories including efficient market hypothesis, CAPM, portfolio theory, and utility theory, application of important and relevant foundational concepts in the financial field, review of prominent financial figures and major pieces of work, explanation of the application of foundational concepts in each major piece of work.

3. Profiles of Prominent Financial Experts

Part I of the book contains the following profiles of some of the most prominent financial experts throughout history. Their contributions continue to guide the investment profession today.

• Thomas Bayes (1701-1761), mathematician and theologian. He showed how to interpret incomplete information with incomplete evidence. Probability tools have numerous applications in many areas of finance.

• Benjamin Graham (1894-1976), known as ‘the father of securities analysis’. An influential career as an economist was followed by a successful academic career during which he was a former director of the New York Stock Exchange Institute. He wrote 10 books. He is best known for his ‘value investing’, which he defined as purchasing stocks when they trade for less than their intrinsic value. He also wrote extensively on the efficient market hypothesis and on portfolio construction.

• Jon Danielsson (1963-). He has been with the London School of Economics since 1988, where his research areas include international finance, financial risk, empirical finance, time series and extreme value theory. His publications include five books. His modelling of extreme risks has led to the creation of a new measure, which is known as the ‘Danielsson Coefficient Index’. It also covers non-financial measures of risk.

• Hall Martin (1949-). Professor of finance and economics at the University of Leicester. He has written over 900 books, which have appeared in more than sixty countries. He offers correspondence finance courses at certificate, diplomas, and degree levels.

4. Impact of Famous Financial Experts on the Industry

Do financial experts matter? This is a question that has received a tremendous amount of attention from financial economists. In their survey article, Grinblatt and Titman (1993, p. 537) cite Churchill’s report of research that more money management operations went out of business this year than the last sixteen. Additionally, Brown, Harlow, and Starks (1996, p. 397) quote Wermus’s observation that nearly 100 years of research in decision-making under uncertainty has not yet adequately explained why investors continue to pay fees to mutual fund managers for the privilege of becoming non-diversified; research to address this paradox is needed. The research of Grinblatt and Titman (1993) and Brown, Harrow, and Starks is explicitly about short-term stock price reactions to mutual fund manager revelation in the popular press; there is also a large body of evidence on the performance of pension plan investment advisers (e.g., Amit, 1989).

The buzzword in this literature is transparency. Good data on the performance of financial experts could increase transparency and hence improve the investment decision of individual investors as well as the governance decisions of the trustees of institutional investors. But individuals may face data costs in obtaining and evaluating this important information. One function of the press is to bridge the information gap between specialists and readers. This paper will examine whether this important process is working for one segment of the investment community, that portion for which financial experts have the greatest potential impact — individual direct stock market investors. Specifically, we will look at reports in the popular press of famous successful financial experts, early-to-mid-20th century securities analysts, and describe their investment philosophies and procedures. Are these reports reliable? If so, what can we learn from the reports?

5. Legacy and Future Influence of Financial Experts

Almost a decade after the end of the “Great Recession,” investment professionals reflect on the contributions and guidance offered by the finance industry’s most iconic names. We look to favorite financial writers for wisdom and understanding of today’s market and a glimpse of the future. At age 88, Burton Malkiel authored another piece for the Wall Street Journal. The decades of Mr. Malkiel’s writings remain a readily accessible and rich source of understanding about investing. They present servable and enduring principles for investors. Many of us have been influenced by Mr. Malkiel’s Random Walk Down Wall Street, which put forth an elegant argument in explaining how financial markets worked and why it was difficult to beat the market.

John Bogle expanded on Mr. Malkiel’s work, arguing that not only is the market quite efficient, but that investors could easily take advantage of such efficiency via low-cost index mutual funds. His simplicity and straightforward message influenced droves of investment professionals. Since we have dedicated so much space to others, it’s important to revisit our most recent memoriam. Jack Bogle co-founded the first index mutual fund, the Vanguard 500, and continued to revolutionize the mutual fund space. His creation and implementation of the S&P 500 was a key step in the development of exchange-traded funds that eventually allowed investors to access the entire capitalization of financial markets.