Baltic Business Research

Those who know me have probably kept in mind that I’ve been a strong supporter of behavioral finance for at least 15 years. (See, for example, my piece “Behavioral Finance – Theory and Practical Application” in Business Economics, edited by Nabe , from June 2001). For this reason, I feel particularly happy about the great recognition Robert Shiller today received for his research on behavior on financial markets – research which gives us a lot of wisdom about psychology in economics. I really do hope that even conservative decision makers who distribute the financial resources for research now become more aware of the importance of the human beings that are behind financial decisions. But I would like to address my brief remarks also to central bankers and other bankers – institutions where one many times still can find an insufficient feeling for the psychology of bigger financial markets (macrofinancial) and customers (microfinancial)

Eugene Fama, however is different compared to Shiller. I had him on my list for years but took him finally away after all irrationality on financial markets in the past years.  Fama is a great financial economist and I do not have mixed feelings about his prize when Shiller is awarded at the same time. This is now the case. One should, however, keep in mind that Fama during the years was a dedicated supporter of efficient financial markets – a phenomenon which really cannot be observed all the time. I probably should add that Fama more recently became somewhat softer in this respect.

Lars Peter Hansen – the third winner of this year’s Nobel Prize – has been one of my main favorites in the past few years. His statistical and econometrical research is great. And things get even better when the research is applicable to financial markets and asset prices. And this is really the case.

All in all:  The Nobel Prize Committee for economics made a good choice in 2013.