September 25, 2007
It has been brought to my attention that there is an error in the
account of my submission of the paper published in the September 1964 Journal
of Finance, "Capital Asset Prices: A Theory of Market Equilibrium Under
Conditions of Risk". In his 1992 book, Capital Ideas, (pp. 194-195) Peter Bernstein
states that in 1963 the paper "... was quickly rejected by the editor of the
Journal, Dudley Luckett of Iowa State University, acting on the advice of a
referee. Luckett told Sharpe that his assumption that all investors made the
same predictions was so 'preposterous' as to make his conclusions
'uninteresting'." In a footnote, Peter attributes this information to personal
correspondence and interviews with me. The book goes on to say that I revised
the paper, the editorship of the Journal changed hands and that the paper was
finally published in 1964.
It is true that the initial referee for the paper recommended that it
not be published, mainly on the grounds that the assumption that all investors
agree on probabilistic estimates of future returns was too unrealistic. It is
also true that there was correspondence back and forth concerning the paper and
that it was finally accepted after a change in editorship. However, attributing
either the initial rejection or the final acceptance to Dudley Luckett was an
error, since he did not assume the editorship of the Journal of Finance until 1967.
A am very sorry that this error occurred and extend my apology to
Professor Luckett, who served with great distinction as editor of the
Journal.