Empirical Asset Pricing: Eugene Fama, Lars Peter Hansen, and Robert Shiller

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Empirical Asset Pricing: Eugene Fama, Lars Peter Hansen, and Robert Shiller

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Title: Empirical Asset Pricing: Eugene Fama, Lars Peter Hansen, and Robert Shiller
Author: Campbell, John Y.
Citation: Campbell, John Y. 2014. “Empirical Asset Pricing: Eugene Fama, Lars Peter Hansen, and Robert Shiller.” Working Paper, Department of Economics, Harvard University.
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Abstract: The Nobel Memorial Prize in Economic Sciences for 2013 was awarded to Eugene Fama, Lars Peter Hansen, and Robert Shiller for their contributions to the empirical study of asset pricing. Some observers have found it hard to understand the common elements of the laureates research, preferring to highlight areas of disagreement among them. This paper argues that empirical asset pricing is a coherent enterprise, which owes much to the laureates seminal contributions, and that important themes in the literature can best be understood by considering the laureates in pairs. Specifically, after summarizing modern asset pricing theory using the stochastic discount factor as an organizing framework, the paper discusses the joint hypothesis problem in tests of market e¢ ciency, which is as much an opportunity as a problem (Fama and Hansen); patterns of short- and long-term predictability in asset returns (Fama and Shiller); and models of deviations from rational expectations (Hansen and Shiller). The paper concludes by reviewing ways in which the laureates have already influenced the practice of finance, and may influence future innovations.
Other Sources: doi:10.2139/ssrn.2417875
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:25142544
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