In 1992, Eugene Fama and Ken French outlined the importance of analyzing multiple risk factors when attempting to explain portfolio performance.

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At first glance, it may be easy to see a number of deficiencies in the efficient market theory, created in the 1970s by Eugene Fama.

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"I think everyone accepts that his basic point is true, " says Eugene Fama , professor of finance at the University of Chicago's Graduate School of Business.

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This is an efficient market view and it is supported by well-known academics Eugene Fama and Ken French, creators of the Fama-French Three Factor Model.

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Eugene Fama asserted that investment returns follow a normal distribution.

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Some may be crackpots, but the list includes Nobel laureates (Gary Becker, Robert Lucas, Thomas Sargent) as well as other highly esteemed researchers (Robert Barro, John Cochrane, Eugene Fama, Greg Mankiw).

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At the other end of the spectrum are proponents of modern portfolio theory and efficient markets, academicians like Burton Malkiel of Princeton University and Eugene Fama of The University of Chicago.

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This finding is confirmed by 30 years of research, ranging from "behaviorists" such as Robert Shiller and Richard Thaler to "efficient marketers" such as Eugene Fama and Ken French, to "economists" such as John Campbell and myself.

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To give two high-profile examples, Ibbotson and Associates and the academic duo of Eugene Fama and Kenneth French did similar studies that found that value stocks, as measured by low price-to-book ratios, outperform growth stocks over the long run.

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