Skip to main content Accessibility help
×
Home
Hostname: page-component-564cf476b6-z65vl Total loading time: 0.22 Render date: 2021-06-19T22:12:27.685Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": true, "newCiteModal": false, "newCitedByModal": true, "newEcommerce": true }

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

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
Copyright
Copyright © The History of Economics Society 2007

Access options

Get access to the full version of this content by using one of the access options below.

References

Allen, Robert Loring (1993) Irving Fisher: A Biography (Cambridge, MA: Blackwell).Google Scholar
Bernstein, Peter L. (1992) Capital Ideas: The Improbable Origins of Modern Wall Street (New York: Free Press).Google Scholar
Bickerton, I. (2003) Dim Bulbs? Tulip Investors at a Loss, Financial Times, December 5 (posted on Miami Herald Website Herald.com, December 6).Google Scholar
Bowley, A. L. (1902) Review of Norton (1902), Economic Journal, 12 (48), pp. 516–18.CrossRefGoogle Scholar
Brown, Stephen J., Goetzmann, William N., and Kumar, Alok (1998) The Dow Theory: William Peter Hamilton's Track Record Reconsidered, Journal of Finance, 53 (08), pp. 1311–33.CrossRefGoogle Scholar
Burton, J. H. (1980) Irving Fisher, Father of the Income Approach, Real Estate Appraiser and Analyst, 46 (09/10), pp. 5660.Google Scholar
Chambers, R. J. (1971) Income and Capital: Fisher's Legacy, Journal of Accounting Research, 9 (1), pp. 137–49.CrossRefGoogle Scholar
Chambers, Stanley Paul (1934) Fluctuations in Capital and the Demand for Money, Review of Economic Studies, 2 (10), pp. 3850.CrossRefGoogle Scholar
Chua, Jess H., and Woodward, Richard S. (1983) J. M. Keynes's Investment Performance: A Note, Journal of Finance, 38 (03), pp. 153–56.CrossRefGoogle Scholar
Cootner, Paul H. (Ed) (1964) The Random Character of Stock Market Prices (Cambridge, MA: MIT Press).Google Scholar
Cowles, Alfred III, (1933) Can Stock Market Forecasters Forecast? Econometrica, 1 (07), pp. 309–24.CrossRefGoogle Scholar
Cowles, Alfred III, (1936) Evidence of Structure in Common Stock Prices, in: C. H. Sisam (Ed) Abstracts of Papers Presented at the Research Conference on Economics and Statistics Held by the Cowles Commission for Research in Economics, at Colorado College, July 6 to August 8, 1936 (Colorado Springs, CO: Colorado College Publication, General series, No. 208), pp. 97–99.Google Scholar
Cowles, Alfred III, (1944) Stock Market Forecasting, Econometrica, 12 (0710), pp. 206–14.CrossRefGoogle Scholar
Cowles, Alfred III, (1960) A Revision of Previous Conclusions Regarding Stock Price behavior, Econometrica, 28 (10), pp. 909–15. Reprinted in Cootner (1964).CrossRefGoogle Scholar
Cowles, Alfred III, and Associates (1939) Common Stock Indexes, 2nd edition, Cowles Commission for Research in Economics Monograph No. 3 (Bloomington, IN: Principia Press).Google Scholar
Cowles, Alfred III, and Jones, Herbert E. (1937) Some A Posteriori Probabilities in Stock Market Action, Econometrica, 5 (07), pp. 280–94.CrossRefGoogle Scholar
Cox, Garfield V. (1928) An Appraisal of American Business Forecasts (Chicago: University of Chicago Press).Google Scholar
Cox, Garfield V. (1930) An Appraisal of American Business Forecasts, revised edition (Chicago: University of Chicago Press).Google Scholar
Crockett, John H. Jr., (1980) Irving Fisher on the Financial Economics of Uncertainty, History of Political Economy, 12 (Spring), pp. 6582.CrossRefGoogle Scholar
Davenport, Nicholas (1975) Keynes in the City, in: Keynes, M. (Ed) Essays on John Maynard Keynes (Cambridge, UK: Cambridge University Press).Google Scholar
Dimand, Robert W. (2005) The Cowles Commission and Foundation on the Functioning of Financial Markets from Irving Fisher and Alfred Cowles to Harry Markowitz and James Tobin. Presented to History of Economics Society session on Cowles Commission, Allied Social Science Associations, Philadelphia, PA.Google Scholar
Dimand, Robert W., and Geanakoplos, John (Eds) (2005) Celebrating Irving Fisher: The Legacy of a Great Economist (Malden, MA: Blackwell).Google Scholar
Dominguez, Kathryn M., Fair, Ray C., and Shapiro, Matthew D. (1988) Forecasting the Depression: Harvard versus Yale, American Economic Review, 78 (09), pp. 595612.Google Scholar
Emery, Henry C. (1896) Speculation on the Stock and Produce Exchanges ofthe United States (New York: Columbia University Press, Studies in History, Economics, and Public Law, VII).Google Scholar
Fisher, Irving (1906) The Nature of Capital and Income (New York: Macmillan). Reprinted in: Fisher (1997), Vol. 2.Google Scholar
Fisher, Irving (1907) The Rate of Interest (New York: Macmillan). Reprinted in: Fisher (1997), Vol. 3.Google Scholar
Fisher, Irving (1922) The Making of Index Numbers (Boston: Houghton Mifflin for Pollak Foundation), edition (1927). Reprinted in: Fisher (1997), Vol. 4.Google Scholar
Fisher, Irving (1925a) Stocks vs. Bonds, The American Review of Reviews 72 (07), pp. 4446, as adapted in Economic Problems: A Book of Selected Readings, in: Fred R. Fairchild and R. T. Compton (Eds) (New York: Macmillan, 1928), pp. 230–36. Reprinted in: Fisher (1997), Vol. 8.Google Scholar
Fisher, Irving (1925b) The Stabilized Bond: A New Idea in Finance, The Annalist, 25 (13 11), pp. 1096 ff., as extracted in Economic Problems: A Book of Selected Readings, ed. Fred R. Fairchild and R. T. Compton (New York: Macmillan, 1928), pp. 236–29. Reprinted in: Fisher (1997), Vol. 8.Google Scholar
Fisher, Irving (1928) The Money Illusion (New York: Adelphi). Reprinted in: Fisher (1997), Vol. 8.Google Scholar
Fisher, Irving (1930a) The Theory of Interest (New York: Macmillan). Reprinted in: Fisher (1997), Vol. 9.Google Scholar
Fisher, Irving (1930b) The Stock Market Crash-And After (New York: Macmillan).Google Scholar
Fisher, Irving (1933) Statistics in the Service of Economics, Journal of the American Statistical Association, 28 (03), pp. 113.CrossRefGoogle Scholar
Fisher, Irving (1997) The Works of Irving Fisher, 14 volumes, edited by William J. Barber assisted by R. Dimand and K. Foster, consulting editor J. Tobin (London: Pickering & Chatto).Google Scholar
Fisher, Irving, with Brown, Harry G. (1911) The Purchasing Power of Money (New York: Macmillan). Reprinted in: Fisher (1997), Vol. 4.Google Scholar
Fisher, Irving, Kemmerer, Edwin W., Brown, Harry G., Clark, Walter E., Norton, John Pease, Rollins, Montgomery, and Sumner, G. Lynn (1912) How to Invest When Prices Are Rising: A Scientific Method of Providing for the Increasing Cost of Living (Scranton, PA: G. Lynn Sumner & Company, Publishers of Securities Review).Google Scholar
Forsyth, R. W. (2003) Tulips, Chinese IPOs Fuel Speculation, Financial Post, 12 8.Google Scholar
Galbraith, John Kenneth (1972) The Great Crash 1929, 3rd edition (Boston: Houghton Mifflin).Google Scholar
Galbraith, John Kenneth (1977) The Age of Uncertainty (Boston: Houghton Mifflin).Google Scholar
Graham, Benjamin (1973) The Intelligent Investor, 4th revised edition (New York: Harper & Row).Google Scholar
Hardy, Charles O. (1923) Risk and Risk-Bearing (Chicago: University of Chicago Press).Google Scholar
Haynes, John (1895) Risk as an Economic Factor, Quarterly Journal of Economics, 9 (07), pp. 409–49.CrossRefGoogle Scholar
Hicks, John R. (1935) A Suggestion for Simplifying the Theory of Money, Economica, new series, 2 (02), pp. 119.CrossRefGoogle Scholar
Karsten, Karl G. (1931) Scientific Forecasting: Its Methods and Application to Practical Business and to Stock Market Operations (New York: Greenberg, Publisher).Google Scholar
Keynes, John Maynard (1925) An American Study of Shares versus Bonds as Permanent Investments, The Nation and Athenaeum, 2 May. Reprinted in: Keynes (1971–89), Vol. XI.Google Scholar
Keynes, John Maynard (19711989) The Collected Writings of John Maynard Keynes, 30 volumes, general eds. Moggridge, Donald E. and Robinson, E. A. G., volume eds. Moggridge, Donald E. and Johnson, Elizabeth S. (London: Macmillan and New York: Cambridge University Press for the Royal Economic Society).Google Scholar
Klein, Judy L. (1997) Statistical Visions in Time: A History of Time-Series Analysis 1662–1938 (Cambridge: Cambridge University Press).Google Scholar
Leavens, Dickson H. (1945) Diversification of Planning, Trusts and Estates, 80, pp. 469–73.Google Scholar
Maes, Ivo (1991) On the Origins of Portfolio Theory, Kyklos, 44 (03), pp. 318.CrossRefGoogle Scholar
Markowitz, Harry M. (1952) Portfolio Selection, Journal of Finance, 7 (03), pp. 7791.Google Scholar
McGrattan, Ellen R., and Prescott, Edward C. (2004) The 1929 Stock Market: Irving Fisher Was Right, International Economic Review, 45 (11), pp. 9911009.CrossRefGoogle Scholar
Mehra, Rajnish, and Prescott, Edward C. (1985) The Equity Premium: A Puzzle, Journal of Monetary Economics, 15 (03), pp. 145–61.CrossRefGoogle Scholar
Norton, John Pease (1902) Statistical Studies in the New York Money Market, Preceded by a Brief Analysis under the Theory of Money and Credit, with Statistical Tables, Diagrams, and Folding Chart (New York: Macmillan, for the Department of Social Sciences, Yale University; reprinted New Haven: Tuttle, Morehouse & Taylor, 1903).Google Scholar
Norton, John Pease (1904) Theory of Loan Credit in Relation to Corporation Economics, Publications of the American Economic Association, Third Series, 5 (2), pp. 3456.Google Scholar
Norton, John Pease (1906) The Depreciation of Gold, Yale Review, 15, pp. 293306.Google Scholar
Norton, John Pease (1910) A Revised Index Number for Measuring the Rise in Prices, Quarterly Journal of Economics, 24 (08), pp. 750–59.CrossRefGoogle Scholar
Rhea, Robert (1932) The Dow Theory (New York: Barron's).Google Scholar
Ross, Edward A. (1896) Uncertainty as a Factor in Production, Annals of the American Academy of Political and Social Science, 8 (11), pp. 304–31.CrossRefGoogle Scholar
Rostow, Walt W. (1940) James Harvey Rogers as an Economist, in James Harvey Rogers 1886–1939 In Memoriam (Stamford, CT: The Overbrook Press), pp. 1328.Google Scholar
Sasuly, Max (1934) Trend Analysis of Statistics: Theory and Technique (Washington, DC: Brookings Institution).Google Scholar
Sasuly, Max (1947) Irving Fisher and Social Science, Econometrica, 15 (10), pp. 255–78.CrossRefGoogle Scholar
Smith, Edgar L. (1924) Common Stocks as Long-Term Investments (New York and London: Macmillan).Google Scholar
Stabile, Donald R. (2005) Forerunners of Modern Financial Economics: A Random Walk in the History of Economic Thought, 1900–1950 (Cheltenham, UK, and Northampton, MA: Edward Elgar).CrossRefGoogle Scholar
Stabile, Donald R., and Putnam, Bluford H. (2002) Irving Fisher and Statistical Approaches to Risk, Review of Financial Economics, 11 (3), pp. 191203.CrossRefGoogle Scholar
Van Strum, Kenneth (1925) Investing in Purchasing Power (Boston: Barron's).Google Scholar
Walter, Christian (1999) Aux origines de la mesure de performance des fonds d'investissement: Les travaux d'Alfred Cowles, Histoire & Mesure, 14 (nos. 1& ), pp. 63197.CrossRefGoogle Scholar
Willett, A. H. (1902) Economic Theory of Risk and Insurance (New York: Columbia University Press, Studies in History, Economics and Public Law, XIV).Google Scholar
Williams, John Burr (1938) The Theory of Investment Value (Cambridge, MA: Harvard University Press; reprinted Amsterdam: North-Holland, 1956).Google Scholar
10
Cited by

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

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

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

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

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

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

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *