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Economist Roger Ibbotson, PhD ’74, helped change the pension fund business with his market predictions. His forecast of long-term double-digit returns for the market created a monumental switch by money managers from bonds to stocks.
Ibbotson’s predictions gained notoriety in 1974 at a University of Chicago conference. With the Dow in the 800s, he and an associate made two stunning pronouncements—in 1998 the Dow would hit 9,218; by November 1999 it would reach 10,000. History proved them correct.
In 1977 while a professor at the GSB, he turned his research into Ibbotson Associates, a successful provider of asset allocation education, advice and tools to financial intermediaries. Now, more than a quarter of a century later, some people are re-thinking Ibbotson’s approach to forecasting.
Fortune magazine took a look at Ibbotson, his methodology, and critiques that his success with the capital asset pricing model has rendered it less reliable. The article, “The 9% Prediction” appeared in the December 26 issue. Read a copy of the Fortune article.
In an interesting sidebar, Joe Mansueto, AB ’78, MBA ‘80, of Morningstar, recently arranged to purchase Ibbotson Associates. You can learn more about the deal in the December 13 issue of the Chicago Tribune.