A Pillar of Modern Finance Turns 50
But wait, didn’t Vanguard’s John Bogle launch the first index fund in 1976? To be precise, Bogle — and more on him later — introduced the first index mutual fund that year.
Although John “Mac” McQuown, a computer-obsessed Northwestern mechanical engineering grad and Harvard MBA, is generally placed as the protagonist in this story, a number of other characters played leading roles in the development of the first index fund.
James Lorie and Lawrence Fisher’s groundbreaking 1964 study “Rates of Return on Investments in Common Stocks” was a critical influence. McQuown met Lorie who in turn introduced him to Eugene Fama of the University of Chicago Booth School of Business. In 1964, McQuown joined the Management Sciences Division of Wells Fargo in San Francisco. Wells Fargo began to engage the services of the so-called “Chicago Gang” — Fama, Michael C. Jensen, Fischer Black, Merton Miller, and Myron Scholes, among other such distinguished academics.
Around this time, William F. Sharpe was working on the capital assets pricing model (CAPM); Paul Samuelson was showing that stock prices follow a random walk; and in 1970, Fama was writing about efficient capital markets.
