3 Americans win economics Nobel for trend-spotting

3 Americans win economics Nobel for trend-spotting
The Royal Swedish Academy of Sciences Torsten Persson, from left, Per Krusell, Staffan Normark and Per Stromberg announce the winners of 2013 Nobel Memorial Prize in Economic Sciences as Eugene Fama, Lars Peter Hansen and Robert Shiller.
STOCKHOLM (AP) - Three Americans won the Nobel prize for economics on Monday for developing methods to study trends in stock, bond and house prices - work that has changed the way people invest.

Eugene Fama showed in the 1960s how hard it is to predict markets in the short run, while Robert Shiller two decades later showed how it can be done in the long run. Lars Peter Hansen developed a statistical method to test theories of asset pricing.

For their separate research, the three economists shared the $1.2 million prize - the last of this year's Nobel awards to be announced.



Hansen said he received the phone call from Sweden when he was on his way to the gym. He said he's not sure how he'll celebrate but he's "still working on taking a deep breath."



Fama helped revolutionize the practice of investing by showing it was difficult to predict individual stock prices in the short run. That led to the emergence of index funds as a common investment.

Shiller showed that there's more predictability in stock and bond markets in the long run. That encouraged the creation of institutional investors, such as hedge funds, that take bets on market trends.


"He also predicted for a long time that the housing market was overvalued and again he was proven right," Englund said. The U.S. property market suffered a crash in 2007 that helped fuel the global financial crisis.

Englund said he believes the three laureates agree on the findings for which they were awarded. However, Fama and Shiller have different "interpretations of the real world," he added.

"It's no secret that for Eugene Fama the sort of null hypothesis is that markets work well and he is willing to believe that until he is proven otherwise whereas for Robert Shiller, I think his null hypothesis is that there are periods of excessive optimism and pessimism," Englund said.


Hansen in the 1980s developed a statistical method to better evaluate theories such as those of Fama and Shiller.


Fama said his work came at a time when computers were beginning to be used by statisticians and economists, many of whom were studying stock prices because they were the most easily available data to come by.

He was getting ready to teach his first class as a Nobel laureate Monday morning. Asked whether his students would get a break, he said: "We'll see, but they're going to get an exam tomorrow anyway. They paid their money, they're gonna get the full pill."

Shiller defended finance as a part of society, arguing that if regulated properly it is "at the core of our civilization."









Associated Press writers Stephen Singer in Hartford, Conn., Paul Wiseman in Washington and Don Babwin and Ashley Heher in Chicago, contributed to this report.