Fama is the Robert R. McCormick Distinguished Service Professor of Finance at the University of Chicago Booth School of Business; Hansen is the David Rockefeller Distinguished Service Professor in Economics, Statistics, and the College, and is research director of the Becker Friedman Institute for Research in Economics. They are among the 89 scholars associated with the University to receive Nobels, and among the 28 who have received the Nobel Memorial Prize in Economics. In addition to Fama and Hansen, four current faculty members are Nobel laureates in economics: Profs. Roger Myerson (who won in 2007), James Heckman (2000), Robert E. Lucas Jr. (1995), and Gary Becker (1992).
At a news conference on Monday morning, Fama credited much of his success to the intellectual culture of the University of Chicago.
“Whatever I am owes two-thirds—maybe three-quarters, maybe 90 percent—to the University of Chicago,” Fama said. “Over the years, the school [and] the economics department has only gotten stronger. The interaction that you get from your colleagues is so influential in building your work that you cannot underestimate its impact.”
Hansen, too, said his colleagues were essential in guiding his approach to research. “This environment here really is something special,” Hansen said. From his mentors and colleagues in the University’s Department of Economics, he learned that “economics is supposed to do something—it’s supposed to explain the world.”
'A great day for Chicago economics'
Members of the University community crowded into the soaring Rothman Winter Garden of the Charles M. Harper Center on Monday morning to hear from the two winners and their colleagues.
“Today is a great day for Chicago economics,” Prof. John List told the cheering crowd.
At the event, Fama and Hansen’s colleagues praised the far-reaching impact of the two laureates’ research.
Hansen’s “powerful, pioneering” methods for assessing economic models have been adopted by social scientists in many fields, said List, the Homer J. Livingston Professor and chair of Economics. “Whether it is to explore how public policies effect unemployment rates, how networks form, or how environmental regulations influence productivity growth, Lars’ work plays a key role.”
Fama’s early work on efficient markets, which gave rise to the index funds many investors participate in today, not only revolutionized academic finance, but also made “a phenomenal impact on the practical world, and really on people’s lives,” said John Heaton, the Joseph L. Gidwitz Professor of Finance and Deputy Dean for Faculty at Chicago Booth.
Heaton also praised Fama’s commitment to his students, noting that Fama spent his first morning as a Nobel laureate teaching a course on portfolio theory and asset pricing.
When he received the call from the Nobel committee, “I was preparing my class, actually,” Fama said.
For his part, Hansen said he was looking forward to meeting with several graduate students later in the afternoon.
“I’ve been very lucky to have a long list of very good graduate students. I’m very proud of this,” he said. “Most of my best students are happy to tell me where I’m wrong and more than happy to expose the gaps in my understanding. My graduate students over the years—current and former ones—have been some of my best colleagues.”
"I can’t distinguish between students and colleagues,” agreed Fama. Former students become colleagues who “contribute to your work through their work, or through commenting on your work. There’s a continuous interchange.”
Understanding trends in asset markets
The work the Nobel honors had roots in the 1960s, when Fama and his collaborators made pivotal contributions concerning the difficulty of predicting stock prices in the short run.
“These findings not only had a profound impact on subsequent research but also changed market practice,” notes the Nobel announcement for the 2013 prize.
“As a pioneering researcher and teacher, Gene embodies the highest aspirations of Chicago Booth, to create knowledge with enduring impact, and to influence and educate current and future leaders,” said Sunil Kumar, dean of Chicago Booth and the George Pratt Shultz Professor of Operations Management. “We are honored to have him as a member of the Booth community, now in his 50th year with us, and we congratulate him on this well-deserved achievement.”
Hansen’s research examines the connection between the macroeconomy and financial markets. His statistical assessments of economic models “go a long way toward explaining asset prices,” the Nobel announcement stated.
Mario Small, dean of the Social Sciences Division and professor in Sociology, said that Hansen “has proven himself year after year to be a creative econometrician, sophisticated empirical researcher, and broad-minded intellectual. He developed important methods to estimate economic models in conditions where previous models were inadequate to meet the complexity of the real world. His work has furthered our understanding of consumption and asset pricing.”
“This award is recognition that he long-ago joined the ranks of the most important economists in the illustrious history of University of Chicago economics,” Small added.