18 Lasse Heje Pedersen

Lasse Heje Pedersen is a Danish financial economist known for his research on liquidity risk and asset pricing. He is the John A. Paulson Professor of Finance and Alternative Investments at the New York University Stern School of Business. He is also a principal at AQR Capital Management.1


Efficiently Inefficient, the title of your new work . . . you could say it’s new ground, but we’ve all seen where the Nobel Prize was split between Fama and Shiller, and I’m guessing there was a certain inspiration for your title from that. If not, tell me the inspiration.

The mental infection known as political correctness is one of the most dangerous intellectual afflictions ever to attack mankind. It appeals to pseudo-intellectuals everywhere, since it evokes the strong streak of cowardice notable among those wielding academic authority nowadays. Any empty-headed student with a powerful voice can claim someone (never specified) will be hurt by a hitherto harmless term, object or activity and be reasonably assured that the dons and professors in charge will show a white feather and do as the student demands. To a great extent PC is the revenge of the resentful underdog.

Paul Johnson2


Yes, that’s right. So there’s been this long academic debate about whether the markets are efficient, and Eugene Fama, he stands for this view that markets are fully efficient and prices reflect the fundamental value of securities versus prices are inefficient. And ...

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