Marty Gruber (left) and Ned Elton have been collaborating for 42 years, producing the best-selling finance textbook.

Dynamic Duo

By Daniel Gross

In 1965, Larry Ritter, then the chairman of NYU Stern’s finance department, hired a group of young academics and tasked them with designing a curriculum. After courses ended, the young professors would hang out at McCann’s Bar, around the corner from the School’s building at 100 Trinity Place. “All the new faculty members did things together,” said Edwin (Ned) Elton, who was finishing his thesis at Carnegie-Mellon when he joined the faculty. One night, Elton and Martin (Marty) Gruber, a chemical engineer out of MIT who received his PhD from Columbia, got into a friendly argument over the effect of share repurchases. Both went home bent on proving the other wrong. “We came in with big proofs, and that became our first journal article,” recalled Gruber. “That started the collaboration, and we’ve been collaborating ever since.”

For 42 years, Elton and Gruber – who now are both Nomura Professors of Finance and who, respectively, have led Stern’s doctoral program for the last 12 years and chaired Stern’s finance department from 1989 to 1997 – have engaged in a most productive academic partnership. They co-authored the best-selling finance textbook, Modern Portfolio Theory and Investment Analysis, which is now in its 7th edition. Together, the duo has published two other books and about 100 journal articles. In 1999, MIT Press published two volumes of their research. Among their favorites: a paper on ex-dividend returns and an article on simple rules for portfolio analysis, published in the Journal of Finance.

Elton and Gruber (who sometimes receive mail addressed to Professor Elton Gruber) live near one another in Ridgewood, New Jersey, where Elton converted the second floor of a barn in the back of his house into an office where they both work.

A great deal has changed at NYU Stern since the mid-1960s, when Gruber taught future Federal Reserve Chairman Alan Greenspan (BS ’48, MS ’50, PhD ’77) in a doctoral course. Among the most significant changes: the understanding that students had to be versed in quantitative economics before they could understand finance, and a shift from the basic corporate finance course to one that stressed the underlying disciplines of instruments and markets.

To a large degree, the success of their continued collaboration relies on the same dynamic that led to their first paper in 1965: respectful disagreement, backed up by research. “I think the reason we have worked together so long is that we rarely agree about anything,” said Gruber. “We’re still trying to prove that the other guy is wrong. And our articles come out better as a result, because it’s like having peer review all the way through.”

And who has won more of the arguments? “Each will tell you that he has won more,” said Elton. “But part of our good working relationship is that we keep our disagreements between ourselves.”

Daniel Gross is editor of Sternbusiness.