Speculative Asset Prices (Nobel Prize Lecture)

I will start this lecture with some general thoughts on the determinants of long-term asset prices such as stock prices or home prices: what, ultimately, drives these prices to change as they do from time to time and how can we interpret these changes? I will consider the discourse in the profession about the role of rationality in the formation of these prices and the growing trend towards behavioral finance and, more broadly, behavioral economics, the growing acceptance of the importance of alternative psychological, sociological, and epidemiological factors as affecting prices. I will focus on the statistical met hods that allow us to learn about the sources of price volatility in the stock market and the housing market, and evidence that has led to the behavioral finance revolution in financial thought in recent decades.

Read more

Is Economics a Science?

I am one of the winners of this year’s Nobel Memorial Prize in Economic Sciences, which makes me acutely aware of criticism of the prize by those who claim that economics – unlike chemistry, physics, or medicine, for which Nobel Prizes are also awarded – is not a science. Are they right?

Read more