Chicago & Yale SOM Profs Win Nobel Prize

Eugene Fama of Chicago Booth

Eugene Fama of Chicago Booth

Rack up another Nobel Prize for the University of Chicago Booth School faculty.

Booth Professor Eugene F. Fama, widely known as the “Father of Modern Finance,” was awarded the Nobel Memorial Prize in Economic Science today (Oct. 14) along with two other professors for research that has improved the forecasting of asset prices in the long term and helped the emergence of index funds in stock markets.

Fama won the prestigious award with Lars Peter Hansen, 60, a professor in the University of Chicago’s department of economics, and Robert J. Shiller, 67, who a finance professor at the Yale School of Management as well as an economics professor at Yale’s department of economics.

The University of Chicago now lays claim to 10 Nobel laureates in economics among current and former faculty members, from Milton Friedman in 1976 to Roger Myerson in 2007.


Fama’s name had come up as a possible winner over many years, but today’s announcement was nonetheless a surprise for the 74-year-old professor. “People have talked about it for a long time, but so many people can win it,” Fama told the Chicago Sun-Times today.  “You put a low probability on it. So when it happens, it’s a surprise.”

For Chicago Booth, it is yet another very positive piece of news. Only last week, Booth topped MBA rankings by The Economist for the second year in a row and moved into second place, behind only Stanford, in Forbes biennial ranking. Booth has been number one in the Bloomberg BusinessWeek rankings since 2006.

And for Fama, the award is the icing on the cake of a spectacular academic career for a man who once studied romantic languages at Tufts University in the hopes of becoming a high school teacher. It didn’t work out and he went into economics. Fama’s grandparents were Sicilian immigrants who owned a grocery store in Boston’s West End. His father drove a lumber truck, while his mother was a homemaker.

“There is no way to predict the price of stocks and bonds over the next few days or weeks,” The Royal Swedish Academy of Sciences said in awarding the 8 million crown ($1.25 million) prize to the three academics. “But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years. These findings … were made and analyzed by this year’s Laureates,” the academy said.

Yale University's Robert Shiller

Yale University’s Robert Shiller


Fama, who joined the Chicago Booth faculty in 1963, earned a bachelor’s degree from Tufts University in 1960, followed by an MBA and PhD from the University of Chicago Booth School of Business in 1964. Fama is a father of four and a grandfather of ten. He is an avid windsurfer and golfer, an opera buff, and a fading tennis player, according to his own bio.

Fama is well known for research with long-time partner Kenneth French, a professor of Dartmouth College, which shows that certain groups of stocks tend to outperform over time. Known as the Fama-French “Three-Factor Model,” company size, style and market risk are now considered essential in a diversified portfolio.

Shiller, meantime, is a full professor at Yale SOM. He has a joint appointment between the School of Management and the Economics Dept. He is Professor of Finance at Yale SOM and a fellow at the school’s International Center for Finance.

In the spring he taught Behavioral and Institutional Economics, an econ course that is cross-listed with SOM.

Perhaps best known as a namesake of the S&P/Case-Shiller housing price index, Shiller distinguished himself with research on the dynamics of asset prices, risk sharing, financial market volatility and on bubbles and crises have received widespread attention among academics, practitioners, and policymakers.

“A lot of people had told me they hoped I would win it, but I am aware that there are so many other worthy people that I had discounted it, so I would say no, I did not expect it,” Schiller told a news conference.

Schiller received his B.A. from the University of Michigan in 1967 and his Ph.D. in economics from MIT in 1972.

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