Lars Peter Hansen

The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category goes to Professor Lars Peter Hansen of the University of Chicago “for making fundamental contributions to our understanding of how economic actors cope with risky and changing environments”, according to the jury’s citation.

In the early 1980s, Hansen devised the Generalized Method of Moments, “a powerful statistical framework that empirically addresses how economic agents cope with changing and risky environments”, and now “the standard textbook method in econometrics”, the jury continued.

His innovation was essentially to design a statistical framework based on economic science itself, resulting in a universally applicable methodological tool with such diverse uses as the testing of asset pricing theories, analysis of macroeconomic models or the study of market power in economic sectors.

Hansen, in the words of the citation, “has used this approach to explore the interconnections between macroeconomic indicators and asset prices in financial markets, showing in particular how to formulate robust policies in periods of high uncertainty. His work forms the basis for much contemporary empirical research in financial economics”.

Hansen’s method helps bridge the gap between economic theories and empirical data. It can be used, for instance, to estimate risk aversion by crossing the statistical analysis of time series on saving and consumption with economic and financial indicators.

His work has also been fundamental to our understanding of financial asset pricing, integrating financial market performance with macroeconomics. And indeed this kind of linkage is an enduring focus of his research: “I am currently interested in the study of how macroeconomic fluctuations and growth are reflected in the price of securities”, explains the new Frontiers laureate.

Jury members also stressed that Hansen’s research “has brought greater discipline to economic theory by allowing it to be tested against the empirical evidence”.

Hansen’s name was put forward for the award by the University of Chicago (United States).

Born in 1952 in Illinois (United States), Lars Peter Hansen completed a degree in mathematics at Utah State University in 1974, and four years later obtained his PhD in economics form the University of Minnesota. Since 1984, he has occupied various professorial posts at the University of Chicago.

He has supervised numerous doctoral theses, and his book Large sample properties of generalized method of moments estimators (1982) is among the most cited publications in the economics field. Among his other well-known texts are Advances in economics and econometrics: theory and applications (2003) and Robustness (2007).

International jury

The jury in this category was chaired by Andreu Mas-Colell, Professor of Economics at Pompeu Fabra University and the 2009 BBVA Foundation Frontiers of Knowledge laureate in Economics, Finance and Management. Remaining members were Manuel Arellano, Professor of Econometrics at the Center for Monetary and Financial Studies (CEMFI) (Spain); José Manuel González-Páramo, member of the Executive Board and Governing Council of the European Central Bank; Hervé Moulin, George A. Peterkin Professor of Economic Theory at Rice University (United States), and Peyton Young, James Meade Professor of Economics at the University of Oxford (United Kingdom).