Three American professors — Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller — were awarded the Nobel Memorial Prize in Economic Science on Monday for competing theories about the movements of asset prices.
The three men, who worked independently, were described as having collectively illuminated the financial markets by showing that stock and bond prices moved unpredictably in the short term but with greater predictability over longer periods. The prize committee said these findings showed that markets were moved by a mix of rational calculus and human behavior.
The New York Times points out that the decision to honor Mr. Fama and Mr. Shiller as contributors to a shared understanding of financial markets, however, papered over differences in their work that have been enormously consequential in recent years. Mr. Fama was honored for his work in the 1960s showing that market prices are accurate reflections of available information. Mr. Shiller was honored for circumscribing that theory in the 1980s by showing that prices deviate from rationality.