A Nobel Prize for the Empirical Analysis of Asset Prices

The 2013 Nobel Memorial Prize in Economics was awarded to Eugene Fama, Robert Shiller, and Lars Peter Hansen for their empirical analysis of asset prices. The paper reviews critically the work of the three economists and highlights the differing conclusions that the three researchers reached on the relatively narrow question of the rationality of individual investors. The paper argues that there is a time inconsistency in the idea that markets reveal information about the future and concludes that, despite the sophistication of their statistical analysis, the laureates have been unable to demonstrate how a sophisticated financial economy can produce their empirical results.