A Utah State University alumnus on Monday was named a recipient of the 2013 Nobel Prize in economics.
Lars Peter Hansen, who teaches at the University of Chicago, was honored with his two collaborators, Eugene Fama, University of Chicago, and Robert Shiller, of Yale University. The trio was recognized for its research on the workings of financial markets, asset prices, behavioral economics and all that goes into the complexities of investing.
"The Laureates have laid the foundation for the current understanding of asset prices," said a statement from the Royal Swedish Academy of Sciences, in Stockholm. "It relies in part on fluctuations in risk and risk attitudes, and in part on behavioral biases and market frictions. ... Their methods have shaped subsequent research in the field, and their findings have been highly influential both academically and practically."
Among the trio's research-based predictions were bursting of the dot.com and housing bubbles.
Fama's research revealed the efficiency of financial markets, which absorb information so fast that individual investors can't outperform the markets as a whole. His work helped popularize index funds, which reflect an entire market of assets, such as the Standard & Poor's 500 stock index.
Shiller's research examined asset prices from a contrasting angle. He showed that in the long run, stock and bond markets can behave irrationally, reaching prices that are out of whack with economic fundamentals.
Hansen has focused on statistical models, creating ways to test competing theories of why asset prices move as they do.
Fama and Shiller "provide the ends of the spectrum" between those who believe financial markets are efficient and those who think them deeply flawed, with Hansen "in the middle doing the math," said Allen Sanderson, a University of Chicago lecturer in economics.
The three economists share the $1.2 million prize. This was the last of the 2013 Nobels to be announced.
"We are excited that Lars has received this well-deserved recognition," said James MacMahon, dean of USU's College of Science, which houses the university's Department of Mathematics and Statistics. "We've followed his many accomplishments through the years and appreciated his faithful support of his alma mater."
Hansen, 60 and the youngest of the three professors, earned his USU mathematics degree in 1974. His father, Roger Gaurth Hansen, was a USU professor of biochemistry and served as provost.
Lars Peter Hansen was honored with an honorary doctorate from USU in 2012, and recalled his USU studies at the commencement ceremony.
"My years at USU were very important to my development as a scholar," he said. "I remember well the influences of my professors Mike Windham in mathematics, Bartell Jensen and Mike Lyons in economics and Doug Alder in history."
Hansen said Windham's classes gave him "a great perspective on mathematics." He credited Jensen and Lyons with preparing him to pursue graduate studies in a top economics program at the University of Minnesota, where Hansen completed a doctorate in 1978.
"Dr. Alder told me, 'Do something special and don't just imitate others."
In 1981, Hansen joined the faculty at University of Chicago, where he serves as the David Rockefeller Distinguished Service Professor in Economics and Statistics and serves as research director for the Becker-Friedman Institute.
In 2009, USU's Huntsman School of Business honored Hansen with a Professional Achievement Award, given by the school "in recognition of individuals who achieve extraordinary success in their careers and demonstrate uncommon leadership in their communities."
Douglas Anderson, Huntsman School of Business dean and a former classmate of Hansen, called his longtime friend "... one of the deepest thinkers I have ever met."
"Lars is genuinely curious about the way the world works and not satisfied with simple-minded answers."
The Associated Press contributed to this report.
Contact reporter Nancy Van Valkenburg at 801-625-4275 or firstname.lastname@example.org. Follow her on Twitter at @S_ENancyVanV.