Monday, October 14, 2013

Now there's a return on an asset

Today the Nobel Committee awarded the 2013 prize in economics to Eugene Fama, Lars Peter Hansen, and Robert Shiller, for theories of asset pricing and the generalized method of moments (GMM) estimator, which has become a standard element of the econometrics toolkit. I remember when I arrived at UC Berkeley in the late 1990s, Roger Craine, now emeritus, was interested in the finance side of macroeconomics and introduced some of these topics to our Ph.D. cohort.  Some of it made its way into my dissertation.

More recent memories are of the New Yorker's John Cassidy interviewing Eugene Fama for a piece entitled "After the Blowup" that appeared in early 2010.

Update: Over at the WSJ, Michael Casey quotes from Cassidy's piece on the topic of credit bubbles and feels Shiller's "Animal Spirits" approach seems to better capture at least recent events. In the interview, Fama explains what he means about bubbles, that in a way the term only applies in hindsight.