CRF Blog

3 U.S. economists win Nobel Prize

by Bill Hayes

In 3 U.S. economists win Nobel Prize, the Los Angeles Times reports that the award winners do not share the same viewpoint.

[Eugene F.] Fama, 74, spent a five-decade career in Chicago demonstrating how well free markets can determine the value of stocks, bonds and other assets. His work led to the now widely held insight that investors should put their money into broad baskets of stocks and not try to pick individual winners because no one person is likely to know more in the long run than the overall market.

That insight provided the underpinning for stock index funds that have since become investment vehicles for billions of dollars.

[Robert J.] Shiller, 67, co-founder of the commonly used Case-Shiller housing price index, provided a vital counterpoint: He showed how markets can still badly malfunction because of behavior such as excessive optimism.

His insight helped him correctly anticipate the bubble in technology stocks more than a decade ago and the housing market boom before its collapse. [more]