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.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.Barron’s: The first edition of A Random Walk Down Wall Street was published in 1973. With the benefit of hindsight, is there anything you would have written differently?Malkiel: I can tell you honestly that it would be pretty much the same take. What I suggested in 1973 is that investors would be much better off if they had simple, low-cost index funds.But there weren’t any index funds in 1973. The first one available for the public wasn’t started until 1976, by Vanguard.We have a lot of information about how index funds have done, as well as the typical actively managed mutual fund. I find that consistently two-thirds of active managers are beaten by the indexes, and those that beat the index in one year are not necessarily the ones who beat it the next year.Over a very, very long period, sure, there are a few people who have outperformed the index. But you can almost count them on one hand. I still believe — even more strongly than I did in 1973 — that most investors would be much better off having at least the core of their portfolio in a low-cost index fund.In a recent interview we did with Ron Baron, a growth manager who’s had long-term success, he said that “with index funds, you are going to be investing in the most successful businesses at that point in time, and at the top of the market you will be massively over-weighted in those companies.”There is no question that it is a rap on indexing — that at the peak of the market in 2000, you had more Internet stocks than you should have had, in retrospect. But active managers had an even a greater proportion than did the index funds.Similarly, you could say that with an index fund at the end of 2007 and the beginning of 2008, you had too much in financial stocks, absolutely. But that’s what killed all the value managers who had done so well for so long.So you are quite right that, with an index fund, you will be invested in what turns out to be the most overvalued part of the market. But you will also be invested in what turns out to be the most undervalued part of the market.The term “random walk” has become so ingrained in the investing culture. What does it actually mean?For me, it simply means that prices are unpredictable. It also has a technical meaning that, in fact, there are certain statistical properties of prices suggesting that there is no way you can predict the future price based on what has happened in the past. And, therefore, technical analysis is really useless.Now, the market is not actually a perfect random walk. There is a book, co-authored by my friend [MIT professor] Andy Lo, called A Non-Random Walk Down Wall Street. I don’t know how he got that title! He concludes that you can look at statistics and say, “You actually do fail the random-walk hypothesis on many occasions.” But the market is very close to a random walk.