• Sweden's news in English

'Disbelief': US trio wins Nobel economics prize

The Local · 14 Oct 2013, 13:01

Published: 14 Oct 2013 13:01 GMT+02:00

Facebook Twitter Google+ reddit

Eugene Fama, Lars Hansen, and Robert Shiller won the prize "for their empirical analysis of asset prices".

"The laureates have laid the foundation for the current understanding of asset prices," the Royal Academy said in a statement.

Reached on the phone in the United States, Shiller was shell-shocked at the news he'd won the Nobel.

"Disbelief, that's the only way to put it," he told reporters.

"A lot of people told me they hoped I would win, I am aware there are so many other worthy people that I discounted it."

Speaking with officials from the Nobel Foundation following the announcement, Hansen said he was "very surprised" to have won, while Fama said he was "thrilled".

Fama and Hansen are both professors at the University of Chicago, while Robert Shiller teaches at Yale University.

The economics laureates were unveiled at a press conference at the Swedish Royal Academy of Sciences at Stockholm University.

Eugene Fama was born in Boston in 1939, and studied at the University of Chicago, where he is now a Distinguished Service Professor.

Lars Peter Hansen was born in 1952, and studied at the University of Minnesota. He is now a Distinguished Service Professor at the University of Chicago.

Robert Shiller is also a US citizen, born in Detroit in 1946. He studied at Massachusetts Institute of Technology, and is now a Sterling Professor of Economics at Yale University in New Haven.

In fielding questions following the announcement, Shiller called the field of finance "fundamental to human activity".

"Finance is a theory that while it has many controversial elements, is useful for society and is important to human welfare. I'm glad to see this has been given recognition," he said.

He admitted, however, that there was still much to learn in the wake of the financial crisis of 2008 and 2009 which continues to affect parts of the global economy.

"The financial crisis reflected mistakes and imperfections in our financial system we're already working on correcting those mistakes, but it will take decades," he said before nevertheless striking a note of optimism.

"There have been financial crises many times throughout history, and we've learned from them," said Shiller.

Commenting on the work of the three researchers, Eva Mörk, an economics professor at Uppsala University, explained that the new laureates were looking at whether asset prices were "predictable or unpredictable".

"In the 1960s, Fama found that in the short run, asset prices are not predictable," she told The Local.

"It's very hard to beat the market, you can't use past information about to predict future prices. If you read it in the paper in the morning, it's too late to react because the market has already reacted."

In the 1980s, Shiller looked at asset prices over longer time horizons and found that they fluctuated more that one might expect based on the dividends paid out.

"He began to see peculiar patterns in the data that were hard to analyze using traditional models," Mörk said.

"We believe that asset prices should reflect future dividends, but what he found was that prices varied a lot more than future dividends. Something else was going on."

Shiller pioneered a new field, behavioural finance, but it was thanks to Hansen's innovations in modelling that allowed the work of this two fellow laureates to be tested in a much simpler and targeted way.

"Hansen's methods, combined with the findings of Shiller and Fama "told researchers in finance that new thinking was needed" said Mörk.

"We learned that we can't hold on to our existing theories; that we need to continue so we can better understand the data," she added.

The Uppsala professor admitted that some may question awarding the researchers in finance as the global economy continues to struggle with the effects of a financial crisis.

"But I would argue that it's even more important when we see that these things matter so much," she said.

"If it wasn't for these laureates, we'd probably have much bigger problems understanding what's happening today."

Despite the advances brought by Shiller, Fama, and Hansen, "there are still a lot of things that we don't know" Mörk continued.

Story continues below…

"We don't have all the answers yet, but thanks to the laureates, we are in a much better position to understand things, and hopefully in the future we'll be in a better position to understand how we should regulate financial markets in order for them not to fall apart," she said.

The prize has been awarded since 1969 by the Bank of Sweden (Sveriges Riksbank), which pays the Nobel Foundation's expenses associated with the prize, as well as the monetary award.

SEE ALSO: Stockholmers speak about their favourite Nobel Prize

While not technically a "Nobel Prize", as Alfred Nobel only left money in his will to physics, chemistry, physiology or medicine, literature, and peace, the economics prize is always presented together with the other prizes in Stockholm in December.

Last year's economics prize went to US economists Alvin E. Roth and Lloyd S. Shapley "for the theory of stable allocations and the practice of market design".

The 2013 Nobel Prizes in medicine, physics, chemistry and literature and the Nobel Peace Prize were all announced last week in Stockholm and Oslo. All awards will be handed out on December 10th, the anniversary of Nobel's death in 1896.

Follow our live blog of the 2013 Nobel Prize announcementshere.

The Local/og/dl

Follow The Local on Twitter

Related links:

The Local (news@thelocal.se)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Löfven: 'Sweden will double its number of troops in Iraq'
Stefan Löfven and Haider al-Abadi during the visit on Monday. Photo: Henrik Montgomery/TT

Swedish Prime Minister Stefan Löfven has promised to double his country's number of troops in Iraq following a meeting with Iraqi counterpart Haider al-Abadi on Monday.

Will Swedes soon be looking for fairtrade porn?
Should Swedes think fairtrade with porn? Photo: Karin Malmhav/SvD/TT

A fairtrade attitude to pornography would be beneficial, Sweden's health minister told The Local.

Presented by Stockholm University
Nordic fashion in focus at Stockholm University
Simon Paulin/imagebank.sweden.se

Nordic fashion took centre stage in the Swedish capital last week as Stockholm University hosted the “first-ever” academic conference looking at luxury and sustainability in the fashion industry.

Referee, coach and parents in Swedish youth football fight
File photo of a referee holding a red card not related to the story. Photo: Stefan Jerrevång/TT

A football dad broke his leg in the brawl in front of 11-year-old kids after a Hammarby youth football game.

Illicit abattoir kept more than 100 bulls' penises
A couple of young bulls not related to the story. Photo: Jonas Ekströmer/TT

Dried cattle genitalia, goats' heads and hundreds of litres of lard were just a few of the many strange finds discovered when police raided a property in Sweden.

This is officially Sweden's most beautiful beard
The most beautiful beard in Sweden. Photo: Memo Göcek

According to a jury of barbers and 'well known bearded profiles', that is.

Presented by Invest Stockholm
One expat's strategy for making friends in Stockholm

You might think it’s hard to make friends in a new city. But if at first you don’t succeed – try something else!

Injured Swedish photographer protected by 'guardian angel'
Swedish photographer Paul Hansen on another occasion. Photo: Fredrik Sandberg/TT

Photographer Paul Hansen thanked his lucky stars for surviving sniper fire while covering the battle for the Isis-held city of Mosul in Iraq.

How Sweden is trying to smooth relations with Saudis
Swedish Prime Minister Stefan Löfven meeting Saudi Arabia's Trade Minister Majid bin Abdullah Al Qasabi. Photo: Henrik Montgomery/TT

Sweden's Prime Minister Stefan Löfven has visited Saudi Arabia a year and a half after relations turned frosty in a major diplomatic row.

My Swedish Career
'Swedish people love it, but they find it quite odd'
Scottish entrepreneur William Macdonald. Photo: Michael Campanella

Meet the web developer and entrepreneur using traditional Scottish ceilidh dancing to break the ice with Swedes.

Sponsored Article
Last chance to vote absentee in the US elections
People-watching: October 21st-23rd
Sponsored Article
This is Malmö: Football capital of Sweden
Fury at plans that 'threaten the IB's survival' in Sweden
Analysis & Opinion
Are we just going to let half the country die?
Blog updates

6 October

10 useful hjälpverb (The Swedish Teacher) »

"Hej! I think the so-called “hjalpverb” (auxiliary verbs in English) are a good way to get…" READ »


8 July

Editor’s blog, July 8th (The Local Sweden) »

"Hej readers, It has, as always, been a bizarre, serious and hilarious week in Sweden. You…" READ »

Sponsored Article
Where is the Swedish music industry heading?
Angry elk chases Swede up a lamp post
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
The Local Voices
'Alienation in Sweden feels better: I find myself a stranger among scores of aliens'
People-watching: October 20th
The Local Voices
A layover at Qatar airport brought this Swedish-Kenyan couple together - now they're heading for marriage
Sponsored Article
Stockholm: creating solutions to global challenges
Swede punches clown that scared his grandmother
Sponsored Article
Swedish for programmers: 'It changed my life'
Fans throw flares and enter pitch in Swedish football riot
Could Swedish blood test solve 'Making a Murderer'?
Sponsored Article
Top 7 tips to help you learn Swedish
Property of the week: Linnéstaden, Gothenburg
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Swedish school to build gender neutral changing room
People-watching: October 14th-16th
Sponsored Article
Stockholm: creating solutions to global challenges
Man in Sweden assaulted by clowns with broken bottle
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Nobel Prize 2016: Literature
Sponsored Article
Where is the Swedish music industry heading?
Watch the man who discovered Bob Dylan react to his Nobel Prize win
Sponsored Article
One expat's strategy for making friends in Stockholm
Record numbers emigrating from Sweden
Sponsored Article
Nordic fashion in focus at Stockholm University
People-watching: October 12th
The Local Voices
'Swedish startups should embrace newcomers' talents - there's nothing to fear'
How far right are the Sweden Democrats?
Property of the week: Triangeln, Malmö
Sweden unveils Europe's first elk hut
People-watching: October 7th-9th
The Local Voices
Syria's White Helmets: The Nobel Peace Prize would have meant a lot, but pulling a child from rubble is the greatest reward
Missing rune stone turns up in Sweden
Nobel Prize 2016: Chemistry
jobs available