Shiller, two others win economics Nobel for 'bubble' warnings

Written By limadu on Senin, 14 Oktober 2013 | 05.32

robert shiller nobel prize

Robert Shiller, one of three Americans to win the Nobel Prize in economics Monday.

NEW YORK (CNNMoney)

Shiller is a professor at Yale University. He is joined by Eugene Fama and Lars Peter Hansen, who both teach at the University of Chicago.

The award was for their work concluding that predicting the price of stocks and bonds in the short term is virtually impossible. But they showed it is possible to forecast the broad course of prices over longer periods, such as the three to five years.

Shiller was among those who warned in the 1990s that the run-up in stock prices as part of the Internet stock bubble was the result of "irrational exuberance."

Last decade, Shiller made similar warnings about the run-up in U.S. home prices. That proved to be correct when the housing bubble burst and plunged the nation into the worst economic downturn since the Great Depression.

He helped to develop the S&P/Case-Shiller home price index, which is one of the most closely watched measures of home values.

Fama and Hansen are not as well known as Shiller outside the field of economics.

Starting in the 1960s, Fama helped to demonstrate that new information is quickly incorporated into stock prices, a fact that makes short-term price predictions difficult.

The Nobel committee said that finding helped lead to the emergence of index stock funds, which are now a staple of so many investors' portfolios today.

Hansen developed a statistical method that was well suited to testing theories of asset pricing, the committee said.

None of the three winners were immediately available for comment early Monday.

Last year's prize went to Alvin Roth of Harvard University and Lloyd Shapley of UCLA, whose work on resource allocation was used for everything from matching job applicants to openings to coming up with way to allocate transplant organs to patients. To top of page

First Published: October 14, 2013: 7:28 AM ET


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