Fama studied Romance Languages and in 1960 acquired the Bachelor at Tufts University. Then he moved to the Graduate School of Business, University of Chicago, where he received his MBA in 1963 and in 1964 graduated with the work The Behavior of Stock Market Prices, PhD. His supervisor was Benoît Mandelbrot.
Fama was an assistant professor (1963-65), associate professor (1966-68), professor (1968-73), Theodore O. Yntema Professor (1973-84), Theodore O. Yntema Distinguished Service Professor (1984-93) and since 1993 - the Robert R. McCormick Distinguished Service Professor of Economics. His work in Chicago was only interrupted by perfoming as a visiting professor at the Catholic University of Louvain (1975-76) and the University of California, Los Angeles (1982-95).
In his dissertation Fama tried to show that stock prices are not predictable, but can be randome. Later, he worked both theoretically and empirically in the field of portfolio theory and pricing. In 1970 he introduced the term of efficient market hypothesis.
In recent years, co-written with Kenneth French, he published a number of essays that connected the validity of the Capital Asset Pricing Model (CAPM). This model says that only the beta as stock-specific variable has an effect on the expected return of the stock. In their essays they describe that in addition to the beta of the stock there are a lot of factors such as market capitalization, the ratio of book value and market value of equity, that affect the expected return of the stock. These results created an extension to the Capital Asset Pricing Model called the Fama-French three-factor model.