A Random Walk to Nowhere: How the Professors Caused a Real "Fraud-on-the-Market"

This book is about an intellectual fraud, one that has become part of legal doctrine that has greatly influenced decisions all the way up to the United States Supreme Court. The "efficient market hypothesis" (EMH), born from the Random Walk theory, started out as an honest attempt to improve insights into how financial markets work, but eventually became almost a religion that every financial economist had to buy into, or risk professional crucifixion. The EMH began over a half century ago. It posits that share prices reflect all available market information, and that it is impossible to consistently outperform the market. This theory dominated research in the academic financial community from the outset, and has continued to do so for decades. Meanwhile, the evidence for above-average profit-making opportunities in the markets has been unfairly suppressed. Written for practitioners in the business, finance and legal industries, this book outlines the major issues that gave rise to the fraud, focusing on the role of statistics in the rise of what the authors call the "New Finance." It details the developments and results of the exclusion of other theories from efficient markets research and highlights the problems arising from a dogmatic adherence to EMH.

Readership: Practitioners in the business, finance and legal industries and students of these subjects.

Dr Edward E Williams was Professor Emeritus at Rice University where he taught for 36 years (1978–2014). He received his BSE from the Wharton School at the University of Pennsylvania in 1966 and his PhD from the University of Texas at Austin in 1968. Over the years, he has written 14 books and numerous articles and scholarly papers. He was one of the original critics of the Efficient Market Hypothesis (EMH) when it first appeared five decades ago. At Rice, he began its entrepreneurship program which is now rated as one of the top such endeavors in the world. During his teaching career, he received many awards for teaching excellence and was named by BusinessWeek as the penultimate entrepreneurship professor in the United States. He has also been Professor of Statistics at Rice where he has published numerous works in financial economics and investments. Professor Williams passed away unexpectedly on October 3, 2018.

Dr John A Dobelman is an investor and Professor in the Practice in Statistics, and Director of the Professional Master's Program at Rice University, Houston, Texas USA; he has taught at Rice since 2004. Prior to that he was a pricing scientist at PROS Holdings, Inc., and held various engineering and management positions in aviation facilities engineering and construction. His current research interests include investments analysis, stochastic modeling for markets and finance, simulation-based and quantitative portfolio selection and management, deception in patterns of noise, optimal display of quantitative information, improved communication, and applications of statistics to engineering models and vice versa. He has worked with Dr Williams on numerous projects dating back several decades.