Economics prize given to asset price professors

THE 2013 Nobel prize in economic sciences was awarded yesterday to three American economists for their roles in understanding asset prices.

Professors Lars Peter Hansen and Eugene Fama of the University of Chicago, and professor Robert Shiller of Yale University, were awarded the prize for this year.

The Royal Swedish Academy of Sciences, which makes decisions on the recipients of the awards, commented: “There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years.

“These findings, which might seem both surprising and contradictory, were made and analysed by this year’s laureates.”

The winning professors will split a cash prize of 8m Swedish krona (£775,000) between them.

The economists receiving the award have not contributed towards a single work together, but have all produced research making significant contributions towards understandings of asset prices and the behaviour of financial markets more generally.

In a press conference after the announcement, Fama said: “Whatever I am, owes at least two thirds or it, maybe three quarters, maybe 90 per cent to the University of Chicago.”

Robert Shiller also added his thoughts on the US government’s debt ceiling situation: “This crisis will be resolved, we won’t see a default.”

However, he suggested that even if the US did briefly default, it would not be “the end of the world”.

There is a precedent to sharing prizes between economists whose works do not agree with one another: in 1974, the Nobel was given to Friedrich Hayek and Gunnar Myrdal, for their work on monetary economics, despite limited agreement between the pair.

The prize in economics is not one of the original set proposed by Alfred Nobel in the late nineteenth century, but has been awarded with the other categories for nearly 50 years.


The eldest of the three, Fama is known for pioneering work on the efficient market hypothesis. In 1970, Fama explained the idea: “A market where there are large numbers of rational, profit ‘maximisers’ actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants.” Fama is a professor of finance at the University of Chicago, which now accounts for 28 laureates who taught, were taught or conducted research there.


A professor of economics at Yale University, Shiller’s most prominent work has been on the behavioural economics of financial bubbles. With Karl Case and Alan Weiss, he developed the Case-Shiller index, which tracks trends in house prices, and is still used widely today. Shiller also produced groundbreaking work on volatility in financial markets. He also wrote a book called Animal Spirits in 2009, with 2001 economics Nobel winner George Akerlof, who is married to the likely next chair of the Federal Reserve, Janet Yellen.


Perhaps the least well known of the three outside of academic economics, Hansen is also a professor at the University of Chicago. He is known foremost for the development of the “generalised method of moments”, a statistical mechanism, which is now a staple of econometric modelling. Hansen’s work has been crucial in modern understandings of asset pricing, and is used widely by researchers. He has also worked on factoring uncertainty and risk into financial models.