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Economic Perspectives, Vol. 23, 3rd, No. 3, August 1999
New facts in finance
In the last 15 years, the cherished "random walk" view that stock returns are unpredictable, the "CAPM" view that the market is the only benchmark and market exposure the only source of returns, and the "expectations hypothesis" relating interest rates of various maturities and countries have all been abandoned. This article surveys this revolution in finance, explaining and integrating the new view of the facts.
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