Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't.
What happened after publication of our paper was that, for the next 40 years, people said, all right, we now know the answer to the capital structure question under ideal conditions.
Another is, if you take money out of your left pocket and put it in your right pocket, you're no richer.
What counts is what you do with your money, not where it came from.
As an economics undergraduate, I also worked on a part-time basis in Cambridge, Massachusetts, for a company that was advising customers about portfolio decisions, writing reports.
My expertise was in public finance, particularly corporate taxation, since I had worked at the US Treasury.
I had some of the students in my finance class actually do some empirical work on capital structures, to see if we could find any obvious patterns in the data, but we couldn't see any.
Of course. I favor passive investing for most investors, because markets are amazingly successful devices for incorporating information into stock prices.
So everybody has some information. The function of the markets is to aggregate that information, evaluate it, and get it incorporated into prices.
To beat the market you'll have to invest serious bucks to dig up information no one else has yet.
My research interests since then have shifted strongly towards the economic and regulatory problems of the financial services industry, and especially of the securities and options exchanges.
I can't speak for them, of course, but I believe that most economists would accept the view that, while you sometimes can make a score by sheer luck, you can't do it constantly, unless you're willing to put the resources in.
Arbitrage proof has since been widely used throughout finance and economics.
Everyone recognizes that's a joke because obviously the number and shape of the pieces doesn't affect the size of the pizza. And similarly, the stocks, bonds, warrants, etc., issued don't affect the aggregate value of the firm.
You only need to make one big score in finance to be a hero forever.