Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Campbell on 2013 Economics Nobel Prizes

While much has been written about the 2013 Economics Nobel Prizes, almost everybody has focused on the disagreements between Fama and Shiller, with Hansen mentioned (if at all) as an afterthought (Asness and Lieuw is a good example). By contrast, John Campbell has a paper (h/t Justin Fox) on the 2013 Nobels for the Scandinavian Journal of Economics, in which Hansen appears as the chief protagonist, while Fama and Shiller play supporting roles. The very title of the paper (“Empirical Asset Pricing”) indicates the difference in emphasis – market efficiency and irrational exuberance play second fiddle to Hansen’s GMM methodology.

To finance people like me, this comes as a shock; Fama and Shiller are people in “our field” while Hansen is an “outsider” (a mere economist, not even a financial economist). Yet on deeper reflection, it is hard to disagree with Campbell’s unstated but barely concealed assessment: while Fama and Shiller are story tellers par excellence, Hansen stands on a different pedestal when it comes to rigour and mathematical elegance.

And even if you have no interest in personalities, I would still strongly recommend Campbell’s paper – it is by far, the best 30 page introduction to Empirical Asset Pricing that I have seen.


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