Awarding of the Nobel Prize to Shiller, Fama and Hansen was Expected

Eugene Fama is a professor of the Chicago University, founder of the theory of market efficiency under which the entire publicly available information on the asset is included in its market price. Starting from 1969, Fama and his collogues published a large number of papers dedicated to research in short-term forecasting of asset prices from different viewpoints. Their research showed strong limitation of such forecasting on the stock market of equities and, thus, confirmed the theory of market efficiency.

Robert Shiller is a professor of the Yale University, most prominent expert in the area of "behavioral" finances. His research in 1981 in volatility of equity prices and subsequent papers on long-term forecasting of those prices made a considerable contribution into development of empirical finances. Robert Shiller showed that despite high volatility of equity prices in the short-term prospect, the movement of the equity market in general is well predicted in the long-term prospect.

 

Lars Peter Hansen is a professor of the Chicago University, most prominent expert in econometrics and author of the generalized method of moments which is widely applied in econometrics. Developed in 1982, the above method permitted researchers for the first time to test empirically different theories based on the assumption of a rationale behavior of economic agents. With utilization of his method, Hansen confirmed the results of Shiller's research that equity prices were highly volatile to be explained by means of a classical "rationale" theory of asset pricing. As a result, new, more complex lines of research, including "behavioral" economics were created.

 

It is worth mentioning that Fama, Shiller and Hansen were the most expected Nobel Prize laureates in the past few years -- the evidence of that is a large number of nominations of the above scientists for that award. In the economic community, there was an understanding for quite a long time that awarding of the Nobel Prize to those scientists was just a matter of time. However, credit is to be given to the Nobel Committee which expertly managed to integrate the merits of those three economists and, thus, save the entire two prizes for the future.

 

B.V. Chokayev, Senior Researcher of the Department of Empirical Research into Investments and Financial Markets