The Royal Swedish Academy of Sciences has decided to award the
Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2013
to three Americans – two University of Chicago professors and a scientist – this
morning for their ‘empirical analysis of asset prices.’
This year’s economics Nobel prize was awarded jointly to Eugene F Fama,
Lars Peter Hansen and Robert J Shiller ‘for
their empirical analysis of asset prices’, according to the award-giving
authority.
They have been awarded the prestigious award for the research that
has improved the forecasting of asset prices in the long term and helped emergence
of index funds in stock markets, said the Royal Swedish Academy of Sciences –
in its press note – that will award the 8 million crown (some $1.25 million)
prize to three Americans in Stockholm, Sweden.
“There is no way to predict the price of stocks and bonds over the
next few days or weeks,” it said, adding that it is but 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 behaviour
of asset prices are key to decisions like savings, house buying and national
economic policy, the academy added. “Mispricing of assets may contribute to
financial crises and, as the recent global recession illustrates, such crises
can damage the overall economy and Fama, Hansen, and Shiller have developed new
methods for studying asset prices and used them in their investigations of
detailed data on the prices of stocks, bonds and other assets. Their methods
have become standard tools in academic research, and their insights provide
guidance for the development of theory as well as for professional investment
practice.”
Among the three Laureates Fama is the Robert R McCormick
Distinguished Service Professor of Finance at University of Chicago, whereas Hansen
is the David Rockefeller Distinguished Service Professor in Economics and Statistics
at University of Chicago – that is a centre of economics Nobel prize winners –
and Shiller is a professor at Yale University.
Instituted by Sveriges Riksbank - the oldest central bank in the
world –to celebrate its 300th anniversary in 1968, The Sveriges Riksbank Prize
in Economic Sciences in Memory of Alfred Nobel was not part of the original
group of awards set out in Nobel's 1895 will.
THE WINNERS
Lars Peter Hansen – best known as the developer of
econometric technique called generalised method of moments (GMM), which is used
to analyse complex economic models in numerous fields – in 2006 had won the
Nemmers Prize for work that applied economic theory to the actual operations of
the economy and markets and for research on how best to come up with policy in
an uncertain environment. The GMM has been widely adopted where fully
specifying and solving a model of a complex economic environment makes maximum
likelihood estimation unwieldy.
research with long-time partner Kenneth
French, a professor of Dartmouth College, which shows that certain groups of
stocks tend to outperform over time. Known as the Fama-French ‘Three-Factor
Model’, company size, style and market risk are now considered essential to
employ in a diversified portfolio.
the Arthur M Okun Professor of Economics at Yale
University and is a fellow at the Yale School of Management's International
Center for Finance. His research relating to the dynamics of asset prices, risk
sharing, financial market volatility and on bubbles and crises have received
widespread attention among academics, practitioners, and policymakers.
FACTS ABOUT THE PRIZE
·
45 Prizes in Economic
Sciences have been awarded every year since 1969.
·
22 Prizes in
Economic Sciences have been given to one Laureate only.
·
17 Prizes in
Economic Sciences have been shared by two Laureates.
·
Six Prizes
in Economic Sciences have been shared between three Laureates.
·
The average
age of all Laureates in Economic Sciences between 1969 and 2012 is 67 years.
·
To date, the
youngest Laureate in Economic Sciences is Kenneth J Arrow, who was 51 years old
when he was awarded in 1972.
·
The oldest
Laureate in Economic Sciences to date is Leonid Hurwicz, who was 90 years old
when he was awarded in 2007. He is also the oldest Laureate to be awarded in
all Prize categories.
·
Elinor
Ostrom was the first female Laureate in Economic Sciences. Elinor Ostrom was
awarded the Prize in 2009.
·
There have
been no posthumous Prizes in Economic Sciences. From 1974, the Statutes of the
Nobel Foundation stipulate that a Prize cannot be awarded posthumously, unless
death has occurred after the announcement of the Prize. Before 1974, the Nobel
Prize has only been awarded posthumously twice: to Dag Hammarskjold (Nobel
Peace Prize 1961) and Erik Axel Karlfeldt (Nobel Prize in Literature 1931).
·
The
University of Chicago previously claimed 10 Nobel laureates in economics among current and former faculty
members, from Milton Friedman in 1976 to Roger Myerson in 2007.
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