The Rational Reminder Podcast | Prof. William Goetzmann: Learning from Financial Market History | Rational Reminder 248 @rationalreminder | Uploaded April 2023 | Updated October 2024, 7 hours ago.
How the financial system works and how we interact with it has grown in complex ways and is a fascinating but nuanced topic. To guide us through the history of the economy is Professor William Goetzmann, who is an expert in finance, economics and art history, and whose research has been featured in top publications. As a highly respected scholar, he's authored numerous books on topics such as real estate and behavioural finance. It is fair to say Professor Goetzmann's work has left a significant impact on both academia and the world. In our conversation, we dive into financial market history and explore more than just broad market returns. We unpack the fascinating phenomenon of economic bubbles and booms, and how they have evolved and shaped the financial system. He also shares crucial insights from the past and advice for investors looking to leverage the market. And to wrap things up, Professor Goetzmann shares his views on money after digging deep into its historical roots. Tune in to unlock the secrets of the past and gain valuable insights for the future as we journey through the fascinating world of economic history. Tune in now!
Timestamps:
0:00 Intro
4:17 Why it's important to collect and examine very long-term historical returns data
9:21 Survivorship bias in the very long-term historical data
13:47 Explaining the unusually high ex-post equity risk premium in the US market
16:03 How William estimates the expected long-term returns of stocks and bonds
23:29 How comparable the global financial world of the early 1900s is to today
29:50 How global finance changed after World War I
32:24 Plausibility of the root causes of global finance's contractions resurfacing today
41:41 How Willam defines asset price "bubbles" in his work on the topic
49:43 Lessons for investors who may have considered timing the market around a perceived bubble
52:44 What explains negative bubble behavior
55:51 How well the frequency of actual crashes line up with investors’ subjective expectations of crashes
1:06:41 What William learned about bubble dynamics by hand-collecting data from the 1720s
1:13:01 William describes what money is
1:18:45 The role money plays in finance
1:23:28 William defines success in his life
Participate in our Community Discussion about this Episode:
community.rationalreminder.ca/t/episode-248-prof-william-goetzmann-learning-from-financial-market-history-discussion-thread/23010
Book From Today’s Episode:
Money Changes Everything: How Finance Made Civilization Possible — amzn.to/3KqOYzX
Links From Today’s Episode:
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Shop Merch — shop.rationalreminder.ca
Join the Community — community.rationalreminder.ca
Follow us on Twitter — twitter.com/RationalRemind
Follow us on Instagram — @rationalreminder
Benjamin on Twitter — twitter.com/benjaminwfelix
Cameron on Twitter — twitter.com/CameronPassmore
Prof. William Goetzmann on Twitter — twitter.com/wgoetzmann
Prof. William Goetzmann — https://som.yale.edu/faculty-research/faculty-directory/william-n-goetzmann
'History and the Equity Risk Premium' — papers.ssrn.com/sol3/papers.cfm?abstract_id=702341
'The present value relation over six centuries: The case of the Bazacle company' — sciencedirect.com/science/article/abs/pii/S0304405X18302836?via%3Dihub
'A Century of Global Stock Markets' — papers.ssrn.com/sol3/papers.cfm?abstract_id=225683
'Will History Rhyme?' — jpm.pm-research.com/content/30/5/34
'New evidence on the first financial bubble' — sciencedirect.com/science/article/abs/pii/S0304405X12002541
'Bubble Investing: Learning from History' — nber.org/papers/w21693#:~:text=History%20is%20important%20to%20the,sample%20size%20for%20inference%20small.
'Negative bubbles: What happens after a crash' — onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12164
'Crash Beliefs From Investor Surveys — nber.org/papers/w22143
'Crash Narratives' — nber.org/papers/w30195
How the financial system works and how we interact with it has grown in complex ways and is a fascinating but nuanced topic. To guide us through the history of the economy is Professor William Goetzmann, who is an expert in finance, economics and art history, and whose research has been featured in top publications. As a highly respected scholar, he's authored numerous books on topics such as real estate and behavioural finance. It is fair to say Professor Goetzmann's work has left a significant impact on both academia and the world. In our conversation, we dive into financial market history and explore more than just broad market returns. We unpack the fascinating phenomenon of economic bubbles and booms, and how they have evolved and shaped the financial system. He also shares crucial insights from the past and advice for investors looking to leverage the market. And to wrap things up, Professor Goetzmann shares his views on money after digging deep into its historical roots. Tune in to unlock the secrets of the past and gain valuable insights for the future as we journey through the fascinating world of economic history. Tune in now!
Timestamps:
0:00 Intro
4:17 Why it's important to collect and examine very long-term historical returns data
9:21 Survivorship bias in the very long-term historical data
13:47 Explaining the unusually high ex-post equity risk premium in the US market
16:03 How William estimates the expected long-term returns of stocks and bonds
23:29 How comparable the global financial world of the early 1900s is to today
29:50 How global finance changed after World War I
32:24 Plausibility of the root causes of global finance's contractions resurfacing today
41:41 How Willam defines asset price "bubbles" in his work on the topic
49:43 Lessons for investors who may have considered timing the market around a perceived bubble
52:44 What explains negative bubble behavior
55:51 How well the frequency of actual crashes line up with investors’ subjective expectations of crashes
1:06:41 What William learned about bubble dynamics by hand-collecting data from the 1720s
1:13:01 William describes what money is
1:18:45 The role money plays in finance
1:23:28 William defines success in his life
Participate in our Community Discussion about this Episode:
community.rationalreminder.ca/t/episode-248-prof-william-goetzmann-learning-from-financial-market-history-discussion-thread/23010
Book From Today’s Episode:
Money Changes Everything: How Finance Made Civilization Possible — amzn.to/3KqOYzX
Links From Today’s Episode:
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Shop Merch — shop.rationalreminder.ca
Join the Community — community.rationalreminder.ca
Follow us on Twitter — twitter.com/RationalRemind
Follow us on Instagram — @rationalreminder
Benjamin on Twitter — twitter.com/benjaminwfelix
Cameron on Twitter — twitter.com/CameronPassmore
Prof. William Goetzmann on Twitter — twitter.com/wgoetzmann
Prof. William Goetzmann — https://som.yale.edu/faculty-research/faculty-directory/william-n-goetzmann
'History and the Equity Risk Premium' — papers.ssrn.com/sol3/papers.cfm?abstract_id=702341
'The present value relation over six centuries: The case of the Bazacle company' — sciencedirect.com/science/article/abs/pii/S0304405X18302836?via%3Dihub
'A Century of Global Stock Markets' — papers.ssrn.com/sol3/papers.cfm?abstract_id=225683
'Will History Rhyme?' — jpm.pm-research.com/content/30/5/34
'New evidence on the first financial bubble' — sciencedirect.com/science/article/abs/pii/S0304405X12002541
'Bubble Investing: Learning from History' — nber.org/papers/w21693#:~:text=History%20is%20important%20to%20the,sample%20size%20for%20inference%20small.
'Negative bubbles: What happens after a crash' — onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12164
'Crash Beliefs From Investor Surveys — nber.org/papers/w22143
'Crash Narratives' — nber.org/papers/w30195
