An Interview with Burton Makliel: The Influential Author of the 1973 BestSeller: A Random Walk Down Wall Street

Lawrence Strauss:

AS A YOUNG INVESTMENT BANKER AT SMITH BARNEY in 1959, Burton Malkiel proposed that the firm ramp up its over-the-counter trading. His idea got shot down by a senior partner, who admonished Malkiel for even thinking about putting the firm's capital at risk.

Malkiel soon left Wall Street for graduate school at Princeton, where he began teaching economics in 1964, and where he has spent much of his academic career since. He's had a lot more impact on Wall Street away from it than when he worked there. His still-popular 1973 classic book, A Random Walk Down Wall Street, has sold more than 1.5 million copies. In it, Malkiel holds that, for the most part, stock prices are unpredictable, and that retail investors are much better off investing in index funds rather than actively managed funds.

"The markets have averaged an annual rate of return of [about] 9 ½% since 1926. But average investors don't make anything like that, because they tend to get in at the top and out at the bottom." --Burton Malkiel

Recently, China has piqued Malkiel's curiosity. He is the chief investment officer at AlphaShares, an asset manager with about $150 million under management. The firm has two indexes used for exchange-traded funds dedicated to international investors who want exposure to China. Barron's caught up with Malkiel recently, to hear his views on China and other topics -- including how the random walk is going these days.