Annual Nobel Prize Lecture: "The Empirical Revolution in Finance"

Submitted by Nicole Johns on

Banner_Econ_NobelIn the annual Nobel Prize in Economics lecture, Assistant Professor Mu-Jeung Yang will present “The Empirical Revolution in Finance: Understanding How Financial Markets Process Information, Reward Risk-taking, and Follow Fads & Fashions” in discussion of the research by Eugene F. FamaLars Peter Hansen and Robert J. Shiller, winners of the 2013 Nobel Prize in Economic Sciences "for their empirical analysis of asset prices". 

The Economics Outreach Network invites you to join alumni and friends of the department, along with current students and faculty, to socialize and enjoy refreshments at a reception prior to the lecture:

Annual Nobel Prize in Economics Lecture Tuesday, May 20, 2014 Reception 5:00 p.m. Lecture 6:00 p.m.

Kane Hall 225 (Walker-Ames Room) Free and open to the public Seats are limited - click here to register

Lecture abstract:

In the last half century, economists changed the way they think about finance from a mostly anecdote-driven theoretical endeavor to an empirical science based on large-scale data. It was nothing short of a revolution, that for the first time gave investors a way to quantitatively evaluate the performance of mutual funds. It also led to financial innovations such as index-funds, which are a major component of retirement savings plans for millions of Americans.

This talk will tell the story of the three revolutionaries at the heart of this transformation: Eugene Fama, Lars Hansen and Robert Shiller. It is a tale centered around the key idea of "efficient markets", which states that stock prices reflect all current information on a company's profit prospects. This idea, explored and promoted by Eugene Fama, did not just resonate on the trading floors of Wall Street. It also inspired a whole generation of policy makers to pursue financial deregulation. But like every major idea, efficient markets were also subject to some major challenges and refinements. The basic insight behind these challenges is that investors can make systematic mistakes in making investment decisions and in forecasting the future. One the one hand, Robert Shiller has discovered important psychological biases in investor behavior, that could explain why stock prices are often subject to fads and fashions. On the other hand, Lars Hansen's work has explored the possibility that even perfectly rational investors don't know the true structure of the economy, and how this might influence booms and busts of stock prices. This lecture will give an overview of these and related developments in the modern analysis of financial markets.

Assistant Professor Mu-Jeung Yang joined UW Economics in 2012, after completing his PhD at the University of California – Berkeley. He specializes in macroeconomics with applications to international issues.

Dr. Mu-Jeung Yang joined the Department of Economics autumn 2012, after completing his PhD at the University of California, Berkeley. He specializes in macroeconomics with applications to international issues, and his research interests include sources of firm-level productivity and distortions and implications of firm heterogeneity in productivity and distortions for macroeconomics.

Born and raised in Germany by Korean parents, Dr. Yang completed his undergraduate studies at the University of Bonn before moving to the U.S. for graduate school.

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