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The 2013 Nobel prize for economics was jointly awarded to Fama, Hansen and Shiller 'for their empirical analysis of asset prices.'
Americans Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller jointly won the Nobel Prize in economics on Monday for their separate work on long-term market trends, including research on stock, bond and housing prices.
Fama and Hansen, both professors at the University of Chicago, and Shiller of Yale University, were awarded the $1.2 million dollar prize for their "surprising and contradictory" findings that show just how hard it is forecast day-to-day asset prices.
"There is no way to predict the price of stocks and bonds over the next few days or weeks," the Royal Swedish Academy of Sciences said. "But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years."
The three professors "have laid the foundation for the current understanding of asset prices. It relies in part on fluctuations in risk and risk attitudes, and in part on behavioral biases and market frictions," the academy added.
Fama's research illustrated how difficult it is to predict stock prices over a short period of time. Shiller's research demonstrated how stock prices over a long period of time can be more predictable. Hansen created a way to test asset pricing theories.
"These are three very different kinds of people and the thing that unites them all is asset pricing," David Warsh, who tracks academic economists, told the Associated Press.
The award comes as the global economy is still recovering from a devastating financial crisis. But for all the harm it caused, Shiller said economists could still learn a lot from it.
"[The financial industry] seems to some people... selfish and money-grubbing. It doesn't really have to be that way. The financial crisis we've been through is traumatic, but we're learning from it," Shiller said.