Two Nobel Prize Winners, Two Coursera Classes

A few weeks ago the Nobel Memorial Prize in Economics was awarded to Eugene Fama and Robert Shiller (and Lars Peter Hansen, whom I do not know).  Fama and Shiller represent two different perspectives on the market.

I enjoy Coursera classes.  Although, I have only done two, they were interesting, kept me motivated by having weekly homework (I felt oddly motivated not to be late on or miss these assignments) and educational.  I like to learn, and probably would have went into academia if my brother hadn’t been so persistent with that saying about “Those who can’t do, teach.”

Below are two Coursera classes that represent the intellectual divide between Fama and Shiller.    Class descriptions from Coursera:

Asset Pricing:  We’ll explore the mean-variance frontier and expected return vs. beta models and factor structures. A brief tour of current facts and puzzles follows. Then, off to study options and the Black-Scholes formula, bond pricing models and facts. We will close with modern portfolio theory.  Would you like to know what buzzwords like beta, risk premium, risk-neutral price, arbitrage, and discount factor mean? This class is for you.

Or…

A Beginner’s Guide to Irrational Behavior: Behavioral economics and the closely related field of behavioral finance couple scientific research on the psychology of decision making with economic theory to better understand what motivates investors, employees, and consumers.  We will examine topics such as how emotion rather than cognition determines economic decisions, “irrational” patterns of thinking about money and investments, how expectations shape perceptions, economic and psychological analyses of dishonesty by presumably honest people, and how social and financial incentives combine to motivate labor by everyday workers and CEOs alike. This highly interdisciplinary course will be relevant to all human beings.

I keep trying to think of an adequate way to concisely articulate why the first class is probably worse than a waste of time (i.e. you will have to spend time unlearning everything) and why the second class is worth infinitely more than it costs (come on, infinity multiplied by zero has to be worth a lot).  Alas, I can’t.

Postscript: Armchair Economist was the first behavioral finance book I read.  It is on par with Dan Ariely’s books and his Coursera class.

 

 

More to Explore

Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.

JOIN THE SOVA GROUP DISTRIBUTION LIST

Close Menu