<p>I will post the obligatory <a href="https://en.wikipedia.org/wiki/Efficient-market_hypothesis" rel="nofollow">Efficient Market Hypothesis</a> answer. This does not directly answer the question, but addresses the aparent misconception that there is some secret economist knowledge that can be used to earn money in financial markets.</p>

<p>Suppose there were some method that would help you to earn more money on financial markets. Suppose that the method in question tells you that you should buy stocks in General Motors because the price of GM stocks will be higher next week. How will the people who trade on financial markets react to this? They will go out and buy GM shares before the price increases. But this increase in demand for GM stocks will cause the price of GM stocks to increase (via the usual laws of supply and demand) today—one week earlier than the method predicted! So the method is self-defeating.</p>

<p>More generally, as soon as <em>any</em> information about the value of a financial instrument becomes public, people will buy or sell causing the price to change to reflect that information. This happens very quickly because the sums of money at stake are huge. (How quickly? Some New York trading firms have laid dedicated fibre-optic cables under the Hudson river to shave a couple of microseconds off of the time it takes to make a transaction).</p>

<p>This simple example illustrate why it is almost impossible to use any publicly available information or method to earn above-normal returns in financial markets. In order to earn such returns, you would have to either</p>

<ol>
<li>have information or a method that is not publicly observable (but acting on such information is known as insider dealing, and is illegal);</li>
<li>be able to act faster than everyone else. But that is almost impossible for an individual because professional trading firms invest millions in shaving fractions of a second off of their transaction times.</li>
</ol>

<p>This, by the way, is why <a href="http://www.managementtoday.co.uk/features/1177093/monkeys-better-trades-average-fund-manager/" rel="nofollow">monkeys can outperform professional traders in picking stocks</a>.</p>

CC BY-SA 3.0
2015-11-16T17:19:14.457Z
2015-11-16T17:19:14.457Z
Ubiquitous
<p>Myron Scholes and Robert C. Merton were 2 economists who co-founded <a href="https://en.wikipedia.org/wiki/Long-Term_Capital_Management" rel="nofollow noreferrer">Long-Term Capital Management</a> fund. They made a lot of money initially both for themselves and investors by using trading strategies they had devised from their academic work. However, the success was quite shortly lived and 2 unlikely (according to their models) events - 1997 Asian financial crisis and 1998 Russian financial crisis put a stop to their windfalls.</p>

<p>There's a captivating BBC documentary about it <a href="https://www.youtube.com/watch?v=tsZRndV5lIc" rel="nofollow noreferrer">here</a>.</p>

CC BY-SA 3.0
2015-11-18T03:52:11.693Z
I think it was not the financial crises which caused their downfall. There were other big problems such as having to find higher risk and lower gain spreads to invest in as they received more and more money from investors. Eventually, they went down due to the Royal Dutch-Shell gamble which was unrelated to the financial crises.
HRSE
CC BY-SA 3.0
2015-11-18T13:28:20.713Z
what is this roya dutch shell gamble you speak of6
Revoltic
CC BY-SA 3.0
2015-11-16T15:47:46.850Z
2017-08-18T15:47:08.320Z
2017-08-18T15:47:08.320Z
Harijs Deksnis
<p>At university classes, I always learned that the only economist who ever became rich was Ricardo. However, Ricardo was already rich before becoming an economist. </p>

<p><a href="https://agenda.weforum.org/2015/10/why-economists-arent-wealthy/" rel="nofollow noreferrer">This</a> article seems support this claim. It also gives an explanation for the lack of rich economist:</p>

<blockquote>
  <p>If becoming wealthy is your goal in studying economics, you may be disappointed.  Although most economists make a good living, few have become rich from their knowledge of economics. In fact, if economists had some secret for making money in, for example, the stock market, they would likely be using those secrets to their own financial advantage [...] In short, economics won’t necessarily make you richer, but it may keep you from making some decisions that would make you poorer.</p>
</blockquote>

CC BY-SA 3.0
2015-11-15T19:04:11.320Z
Very nicely put in the article you referred, perhaps include it in your answer? "If becoming wealthy is your goal in studying economics, you may be disappointed.  Although most economists make a good living, few have become rich from their knowledge of economics. In fact, if economists had some secret for making money in, for example, the stock market, they would likely be using those secrets to their own financial advantage . . . In short, economics won’t necessarily make you richer, but it may keep you from making some decisions that would make you poorer."
Giskard
CC BY-SA 3.0
2015-11-15T18:35:38.417Z
2017-08-18T15:46:35.523Z
2017-08-18T15:46:35.523Z
Stinky
<p>I prefer to learn economic theories from economists who made lots of money from the financial markets and were aided by their economic ideas. Who were they? What are the notable economic theories did they formulate? </p>

CC BY-SA 3.0
2015-11-15T07:56:51.767Z
Perhaps you would like to narrow your request to economics who dealt with finance. There is no reason why someone who was investigating social justice would make money on the financial markets. Another problem is that in finance I can make a lot of money by convincing other people that I know how to make money. This does not mean that my theories are very good. I recommend reading this: https://en.wikipedia.org/wiki/Long-Term_Capital_Management
Giskard
CC BY-SA 3.0
2015-11-15T07:59:18.687Z
The intention of the question is to find out which economics topics I should study carefully to make lots of money from the financial markets. I hate theories and I am not smart enough to learn everything under the sun, then choose the best ones. Would like to narrow to the right topics to learn.
curious
CC BY-SA 3.0
2015-11-15T19:12:29.890Z
First economcis lesson to learn: The [law of no arbitrage](https://en.wikipedia.org/wiki/Arbitrage).
cc7768
CC BY-SA 3.0
2015-11-15T22:37:45.673Z
Unfortunately, I'm afraid that this is not as easy as you seem to believe. You are not going to learn any strategies or theories that will make you rich. Take into consideration that a guy who knows how to become rich won't never tell you. What you can do is try to understand how financial markets work and try to take advantage of this, you may end-up winning money sometimes and loosing others, this is called risk and it's embedded in any financial market. If I were you I would read more about market efficiency, (and inefficiencies)...
Louis. B
<financial-markets>
Who were the economists who made lots of money in the financial markets?
curious
# Who were the economists who made lots of money in the financial markets?

(Asked by: username_0 on 2015-11-15)

I prefer to learn economic theories from economists who made lots of money from the financial markets and were aided by their economic ideas. Who were they? What are the notable economic theories did they formulate?

**Tags:** financial-markets

> **Comments:**
> **username_1**: Perhaps you would like to narrow your request to economics who dealt with finance. There is no reason why someone who was investigating social justice would make money on the financial markets. Another problem is that in finance I can make a lot of money by convincing other people that I know how to make money. This does not mean that my theories are very good. I recommend reading this: https://en.wikipedia.org/wiki/Long-Term_Capital_Management  
> **username_0**: The intention of the question is to find out which economics topics I should study carefully to make lots of money from the financial markets. I hate theories and I am not smart enough to learn everything under the sun, then choose the best ones. Would like to narrow to the right topics to learn.  
> **username_2**: First economcis lesson to learn: The [law of no arbitrage](https://en.wikipedia.org/wiki/Arbitrage).  
> **username_3**: Unfortunately, I'm afraid that this is not as easy as you seem to believe. You are not going to learn any strategies or theories that will make you rich. Take into consideration that a guy who knows how to become rich won't never tell you. What you can do is try to understand how financial markets work and try to take advantage of this, you may end-up winning money sometimes and loosing others, this is called risk and it's embedded in any financial market. If I were you I would read more about market efficiency, (and inefficiencies)...  

---

## 3 answers

### Answer by username_8 on 2015-11-15. Score: 6 | Accepted answer

At university classes, I always learned that the only economist who ever became rich was Ricardo. However, Ricardo was already rich before becoming an economist.

[This](https://agenda.weforum.org/2015/10/why-economists-arent-wealthy/) article seems support this claim. It also gives an explanation for the lack of rich economist:

> If becoming wealthy is your goal in studying economics, you may be disappointed. Although most economists make a good living, few have become rich from their knowledge of economics. In fact, if economists had some secret for making money in, for example, the stock market, they would likely be using those secrets to their own financial advantage [...] In short, economics won’t necessarily make you richer, but it may keep you from making some decisions that would make you poorer.

> **Comments:**
> **username_1**: Very nicely put in the article you referred, perhaps include it in your answer? "If becoming wealthy is your goal in studying economics, you may be disappointed.  Although most economists make a good living, few have become rich from their knowledge of economics. In fact, if economists had some secret for making money in, for example, the stock market, they would likely be using those secrets to their own financial advantage . . . In short, economics won’t necessarily make you richer, but it may keep you from making some decisions that would make you poorer."  

---

### Answer by username_4 on 2015-11-16. Score: 4

I will post the obligatory [Efficient Market Hypothesis](https://en.wikipedia.org/wiki/Efficient-market_hypothesis) answer. This does not directly answer the question, but addresses the aparent misconception that there is some secret economist knowledge that can be used to earn money in financial markets.

Suppose there were some method that would help you to earn more money on financial markets. Suppose that the method in question tells you that you should buy stocks in General Motors because the price of GM stocks will be higher next week. How will the people who trade on financial markets react to this? They will go out and buy GM shares before the price increases. But this increase in demand for GM stocks will cause the price of GM stocks to increase (via the usual laws of supply and demand) today—one week earlier than the method predicted! So the method is self-defeating.

More generally, as soon as *any* information about the value of a financial instrument becomes public, people will buy or sell causing the price to change to reflect that information. This happens very quickly because the sums of money at stake are huge. (How quickly? Some New York trading firms have laid dedicated fibre-optic cables under the Hudson river to shave a couple of microseconds off of the time it takes to make a transaction).

This simple example illustrate why it is almost impossible to use any publicly available information or method to earn above-normal returns in financial markets. In order to earn such returns, you would have to either

1. have information or a method that is not publicly observable (but acting on such information is known as insider dealing, and is illegal);
2. be able to act faster than everyone else. But that is almost impossible for an individual because professional trading firms invest millions in shaving fractions of a second off of their transaction times.

This, by the way, is why [monkeys can outperform professional traders in picking stocks](http://www.managementtoday.co.uk/features/1177093/monkeys-better-trades-average-fund-manager/).


---

### Answer by username_5 on 2015-11-16. Score: 3

Myron Scholes and Robert C. Merton were 2 economists who co-founded [Long-Term Capital Management](https://en.wikipedia.org/wiki/Long-Term_Capital_Management) fund. They made a lot of money initially both for themselves and investors by using trading strategies they had devised from their academic work. However, the success was quite shortly lived and 2 unlikely (according to their models) events - 1997 Asian financial crisis and 1998 Russian financial crisis put a stop to their windfalls.

There's a captivating BBC documentary about it [here](https://www.youtube.com/watch?v=tsZRndV5lIc).

> **Comments:**
> **username_6**: I think it was not the financial crises which caused their downfall. There were other big problems such as having to find higher risk and lower gain spreads to invest in as they received more and more money from investors. Eventually, they went down due to the Royal Dutch-Shell gamble which was unrelated to the financial crises.  
> **username_7**: what is this roya dutch shell gamble you speak of6  

---

