Eugene
Fama, Lars Peter Hansen and Robert Shiller were all recognised
for improving the forecasting of asset prices.
Fama was hailed for his pioneering work into the field, beginning with
his work on short-term asset price changes. It showed that there was
little predictability in asset price changes in the short-term, suggesting it
could be impossible to 'beat the market' in the short term.
He also established that new information, such as an increase in a
stock's dividend, was quickly absorbed into the asset price.
Shiller was
recognised for his work on longer-term asset prices, establishing
that stock prices fluctuated much more than corporate dividends.
That showed how the broad course of asset prices could be predicted
over a longer time-frame, and also give insights into how financial
markets could 'misprice risk' over the long term.
Hansen's
contribution was in developing statistical models to show how investors priced
risk, in particular a new statistical method created in the early 1980s
called the Generalized
Method of Moments (GMM).
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