Three Americans won the Nobel prize in economics Monday for their - TopicsExpress



          

Three Americans won the Nobel prize in economics Monday for their sometimes-contradictory insights into the complexities of investing. Eugene Fama and Lars Peter Hansen of the University of Chicago and Robert Shiller of Yale University were honored for shedding light on the forces that move stock, bond and home prices — findings that have transformed how people invest. Famas research revealed the efficiency of financial markets: They absorb information so fast that individual investors cant outperform the markets as a whole. His work helped popularize index funds, which reflect an entire market of assets, such as the Standard & Poors 500 stock index. Famas work was incredibly fundamental in the 60s and 70s, said David Warsh, who follows economists at his Economic Principals blog. It led to enormous practical change in terms of people not buying particular stocks but buying index funds. Shillers research examined asset prices from a contrasting angle. He showed that in the long run, stock and bond markets can behave irrationally, reaching prices that are out of whack with economic fundamentals. Shiller, 67, predicted the dot-com crash of the early 2000s and the implosion of home prices in 2007. He has also been a pioneer in the field of behavioral economics, or how human emotions, biases and preferences can collectively influence financial markets. Using mathematical tools like the well-known Case-Shiller index of home prices, Shiller has expanded the available information on asset prices. Hansen has focused on statistical models, creating ways to test competing theories of why asset prices move as they do. Fama and Shiller provide the ends of the spectrum between those who believe financial markets are efficient and those who think them deeply flawed, with Hansen in the middle doing the math. The three economists share the $1.2 million prize, the last of this years Nobels to be announced. Their methods have shaped subsequent research in the field, and their findings have been highly influential both academically and practically, the Royal Swedish Academy of Sciences said in Stockholm. Fama, 74, and Hansen, 60, became the 11th and 12th professors from the University of Chicago to win a Nobel in economics, the most for any university. Harvard is second, with six laureates. were are the senior Zambian economist or even professors? cant even make it on the list. Its a challenge to us the young economists to contribute to the body of knowledge and not just carry titles as economists after doing the academic courses.
Posted on: Sat, 26 Oct 2013 12:24:34 +0000

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