Practical analysis for investment professionals
22 October 2015

The Impact of Six Nobel Laureates on Finance

Posted In: Economics

It’s been 10 days since the Royal Swedish Academy of Sciences awarded the Sveriges Riksbank Prize in Economic Sciences to Angus Deaton of Princeton University “for his analysis of consumption, poverty, and welfare.”

Press reports emphasized Deaton’s research into inequality and its troubling growth in recent years. “I think inequality has gone past the point where it’s helping us all get rich, and it’s really becoming a serious threat,” Deaton said. Still, Deaton has expressed the hope that the primary legacy of his research will be his meticulous precision — his “carefulness in measurement,” as he put it.

Of course, the Sveriges Riksbank Prize is awarded for research in economics, not investing. That means that even though the contributions of Deaton and every other Nobelist are significant, there are material differences in how directly useful they are among the broad spectrum of investment professionals.

We’ve been fortunate to have a number of these distinguished figures attend CFA Institute conferences over the years, so we decided to ask CFA Institute Financial NewsBrief readers to rank the contributions of these particular Nobelists.

Of the following Nobel Prize winners in economics who have spoken at CFA Institute conferences, whose work has had the biggest positive impact on the investment profession?

All of the following have won the Nobel Memorial Prize in economics since 2000 and have been speakers at CFA Institute conferences. In your opinion, whose work has had the biggest positive impact on the investment profession?

A plurality (43%) of the 559 respondents pointed to the contributions of Eugene Fama as the most influential, while Robert Shiller and Daniel Kahneman’s scholarship each attracted 26% of the vote. The work of Thomas Sargent, Vernon Smith, and George Akerlof evidently wasn’t as valuable to our readers, since they each garnered 2% or less of the vote individually.

I went and looked at some of the speeches, interviews, and papers that these Nobel laureates have given at CFA Institute events and elsewhere, and I’ve selected some insightful ones to share with you. To increase the probability you’ll learn something new, I’ve listed them in the reverse of their ranking in the poll.

Thomas Sargent

Sargent is credited with leading the (bloodless) rational expectations revolution. One of his big ideas is that the people whose actions are described by models can predict the future as well as the person who created the model.

Vernon Smith

Smith is most associated with economic experiments that put subjects in defined conditions and study their behavior. The owner of a sweet ponytail, he’s also a shoo-in for the title of “best hair” in this august company.

George Akerlof

Initially gaining fame for the study of markets for lemons (cars that are broken), Akerlof has a made a number of wide-ranging contributions, spanning the fields of identity economics, bankruptcies, and the phenomenon of reproductive technology shock.

Daniel Kahneman

The best quote I can find on Kahneman comes from Richard Layard: “He made happiness respectable as a goal for society.” I won’t say anything more: That should induce you to at least watch the video interview.

Robert Shiller

A founding member of our Future of Finance Advisory Council, Shiller is known for his penetrating insight on behavioral finance as well as a number of prescient market calls, including the dot-com and housing bubbles.

Eugene Fama

Called the “father of modern finance,” Fama is most closely associated with the efficient market hypothesis and the three-factor model he created with Kenneth French.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

About the Author(s)
Sloane Ortel

Sloane Ortel is the founder of Invest Vegan, an ethics-first registered investment adviser that manages distinctive discretionary portfolios of public equities on behalf of aligned individuals and institutions. Before establishing her own firm, she joined CFA Institute’s staff as a sophomore at Fordham University and spent close to a decade helping members adapt to a changing investment landscape as a collaborator, curator, and commentator. She is also a co-host of Free Money, a podcast for sustainability-oriented investors with a sense of humor.

2 thoughts on “The Impact of Six Nobel Laureates on Finance”

  1. Mohomed Hisham El Pharis Shariff says:

    Robert Shiller

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