When are Markets “Rational”?

Last month’s award of the Nobel Price in economics set off a great deal of chortling because one of the three recipients, Eugene Fama, received the award for saying that markets are efficient at capital allocation and another, Robert Schiller, received the award for saying they are not.

Explaining the Housing Bubble

In the simplest terms, the housing bubble was caused by a flood of liquidity chasing mispriced risk.