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Rekenthaler Report

How Not to Invest

The (alleged) woes of finance professors.

The Barber's Bad Haircut
Noah Smith posits that his fellow finance professors are "the world's smartest bad investors." As Smith points out, Nobel laureates Myron Scholes and Robert Merton lack neither brain power nor knowledge of investments, but they flopped spectacularly at Long-Term Capital Management. More recently, MIT's financial-engineering whiz, Andrew Lo, has struggled with his money-management firm. And famously, the brilliant economist Irving Fisher got skinned in the Great Crash of ’29.

Smith believes that finance and economics professors struggle because they are too wedded to theory: