The Theory

Paul Samuelson, in a foreword to the full translation of Louis Bachelier’s

Theory of Speculation: The Origins of Modern Finance

, stated:

[The] discovery or rediscovery of Louis Bachelier’s 1900 Sorbonne thesis, “Théorie de la spéculation,” began only in the middle of the twentieth century, and initially involved a dozen or so postcards sent out from Yale by the late Jimmie Savage … in paraphrase, the postcard’s message said, approximately, “Do any of you economist guys know about a 1914 French book on the theory of speculation by some French professor named Bachelier?” …

[O]pportunistically, I suggested replacing Bachelier’s absolute Gaussian distribution by “geometric” Brownian motion based on log-Gaussian distributions. Independently, the astronomer M.F.M. Osborne made the same suggestion.

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In an interview with Samuelson and his former prodigy, Robert Merton, Samuelson told the story of how he discovered the work of Louis Bachelier. Even before he received that fateful postcard from Leonard Jimmie Savage that elevated the discipline’s awareness of Bachelier, Samuelson was aware of Bachelier’s work. He also had an almost lifelong interest in price dynamics and was familiar with the analyses of commodity futures prices by Holbrook Working and Maurice Kendall who concluded that such a time-series plot appeared much like a random walk.