Who is the Father of Financial Management?

Eugene Fama is a remarkable individual who is now a Robert R. McCormick Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. He was ranked as the 9th most influential economist of all time in April 2019 based on his academic contributions. He shared the Nobel Memorial Prize in Economic Sciences jointly with Lars Peter Hanson and Robert Shiller.
Eugene Fama Father of Financial Management
His Doctoral supervisors were Nobel Prize winners Harry Roberts and Merton Miller; at the Booth School of Business at the University of Chicago, he was awarded his MBA and Ph.D. in finance and economics.

Even though all his grandparents were immigrants from Italy, Boston, Massachusetts, is Fama’s birthplace, and his parents are Francis and Angelina Fama. Eugene, an Athletic Hall of Fame honored awardee who attended the Maiden Catholic High School before earning his undergraduate degree in 1960 in Romance Languages magna cum laude when he pursued higher education at Tufts University, where he again became one of the top student-athletes at the school.
Benoit Mandelbrot influenced him and has spent much time teaching at the University of Chicago.

Who is the Father of Financial Management?

Dr. Eugen Fama was the father of financial management and father of modern finance, a professor at the University of Chicago, a founding board member of Dimensional Fund Advisors, and a Laureate of the Nobel Memorial Prize in Economics in 2013.

key achievements of Eugene Fama:

  • Born in 1939, Fama is an American economist and Nobel Laureate.
  • He is best known for his work on portfolio theory and asset pricing, both theoretical and empirical.
  • Fama is often called the “Father of Modern Finance” for his contribution to financial economics.
  • Fama earned his undergraduate degree from Tufts University in 1960 and his MBA and Ph.D. from the University of Chicago in 1963 and 1964, respectively.
  • Fama has been a professor at the University of Chicago Booth School of Business for over 50 years, where he continues to teach and research.
  • He was instrumental in the development of the theory of efficient markets. His doctoral thesis proposed the concept of the “efficient market hypothesis” (EMH), which posits that financial markets are always perfectly efficient, meaning that it’s impossible to achieve higher-than-average returns consistently.
  • Fama has written two books and published several influential papers in economics and finance.
  • Fama and Kenneth French devised the “Fama-French three-factor model” to predict stock returns better. This model considers market risk, company size, and value factors in its predictions.
  • In 2013, Fama was awarded the Nobel Prize in Economics, which he shared with Lars Peter Hansen and Robert Shiller. The Nobel Committee recognized them for their empirical analysis of asset prices.
  • Fama is a board member of Dimensional Fund Advisors, a firm that applies his academic findings to real-world investment solutions.
  • He’s been recognized for his contributions to economics and finance with numerous awards and honorary degrees.
  • His work has profoundly influenced how we understand, analyze, and predict financial markets, shaping many investment strategies and regulations.


Eugene Fama is the father of the efficient-market hypothesis.

His very impressive Ph.D. thesis was published in the Journal of Business in January 1965, and in 1968 in Institutional Investor, it was entitled “The Behavior of Stock Market Prices” and concluded that stock returns were explainable with many different discount rates. It was later rewritten into a less technical article than Walks in Stock Market Prices”.

His work after that showed how time-varying discount rates could explain predictability in expected stock returns. Higher average returns during recessions can be explained by a systematic increase in risk aversion, which lowers prices and increases average returns. In 1969 Fama won the Nobel Memorial Prize in Economic Sciences 2013.

Many influential persons have recognized another vital work that he did in 1969. It was an interesting article (written by several co-authors), “The Adjustment of Stock Prices to New Information.” He tried to analyze how stock prices respond to events using price data from the CRSP database; it was the first of many other published studies.

The Ph.D. thesis Fama did in 1965 has caused people to see him as the person with the voice of authority for the efficient-market hypothesis. He also published an analysis of the behavior of stock market prices. He explained his ideas about the “fat tail distribution properties,” he implied that extreme movements were more common than predicted on Normality’s assumption.

In 1970 he proposed two concepts being used in efficient markets even now when he wrote an article entitled “Efficient Capital Markets.” The strong form, semi-strong form, and weak efficiency are the three types of efficiencies that Fama first proposed. The information set was historical prices in the invalid form; it could be difficult to profit. All public information was already reflected in prices. He referred to Companies’ announcements and annual earnings figures and saw this as the semi-strong form’s requirements.

The strong form included all information sets and incorporated in price trends, and no monopolistic information can require profits. Insider trading was excluded from profit-making, and he also explained how the notion of market efficiency could not be removed while the market equilibrium model still existed. These concepts have not found favor in the eyes of some researchers, but they still stand.

The creation of the index and exchange-traded funds is based on Fama’s work on market efficiency. It has been included in about $4.3 trillion of the $18.1 trillion of the Investment Company’s net assets. This was stated in the 2016 Investment Company Factbook. It shows that his work has been used because it has practical importance.

He continues to influence most current generations of finance researchers as he still plays a vital role in maintaining a thought leadership position at the University of Chicago Booth School of Business. In addition, he is Chairman of the Board of Directors at the Center for Research in Security Prices.

There is no doubt that Eugene Fama and all his achievements have influenced stock markets in many places throughout the years.
In asset pricing and portfolio management, Eugene Fama and Kenneth French designed the Fama–French three-factor model to describe stock returns.

However, Fama has been controversial recently because of a series of papers that he wrote with co-author Kenneth French; it has caused doubt to be cast on the validity of the (CAPM) Capital Asset Pricing Model, which is rooted in the belief that a stock’s beta alone should explain its average return. These papers explained differences in stock returns: value and market capitalization, which they believe are above and beyond a stock market beta, and explain stock returns differences. They are looked at as anomalies in past work.



Igor has been a trader since 2007. Currently, Igor works for several prop trading companies. He is an expert in financial niche, long-term trading, and weekly technical levels. The primary field of Igor's research is the application of machine learning in algorithmic trading. Education: Computer Engineering and Ph.D. in machine learning. Igor regularly publishes trading-related videos on the Fxigor Youtube channel. To contact Igor write on: igor@forex.in.rs

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