Lars Peter Hansen

Last updated

Lars Peter Hansen
Nobel Prize laureate Lars Peter Hansen at press conference 2013 2.jpg
Lars Peter Hansen (2013)
Born (1952-10-26) October 26, 1952 (age 70)
Nationality United States
Institution University of Chicago
Carnegie Mellon University
Field Macroeconomics
School or
Chicago School of Economics
Alma mater University of Minnesota (Ph.D.)
Utah State University (B.Sc.)
Christopher A. Sims
Narayana Kocherlakota [1]
Masao Ogaki Amir Yaron Ravi Jagannathan
Influences Thomas J. Sargent, Christopher A. Sims
ContributionsGeneralized method of moments, robust control applied to macroeconomics and asset pricing
Awards Frisch Medal (with Kenneth J. Singleton), 1984

Nemmers Prize, 2006

CME Group-MSRI Prize, 2008

BBVA Foundation Frontiers of Knowledge Awards, 2010

Nobel Memorial Prize in Economics, 2013
Information at IDEAS / RePEc
Lars Peter Hansen, 2007 Lars Peter Hansen photo in 2007.jpg
Lars Peter Hansen, 2007

Lars Peter Hansen (born 26 October 1952 in Urbana, Illinois [2] ) is an American economist. He is the David Rockefeller Distinguished Service Professor in Economics, Statistics, and the Booth School of Business, at the University of Chicago and a 2013 recipient of the Nobel Memorial Prize in Economics. [3] [4]


Hansen is best known for his work on the generalized method of moments, he is also a distinguished macroeconomist, focusing on the linkages between the financial sector and the macroeconomy. His current collaborative research develops and applies methods for pricing the exposure to macroeconomic shocks over alternative investment horizons and investigates the implications of the pricing of long-term uncertainty.

Among other honors, he received the 2010 BBVA Foundation Frontiers of Knowledge Award [5] in the category of Economy, Finance and Management.


After graduating from Utah State University (B.S. Mathematics, Political Science, 1974) and the University of Minnesota (Ph.D. Economics, 1978) he served as assistant and associate professor at Carnegie Mellon University before moving to the University of Chicago in 1981. He is currently the David Rockefeller Distinguished Service Professor in Economics, Statistics and the College at the University of Chicago. He is married to Grace Tsiang (Chinese :蒋人瑞; pinyin :Jiǎng Rénruì), who is the daughter of the famous economist Sho-Chieh Tsiang. Together, Hansen and Tsiang have one son named Peter. [6] He has two brothers, Ted Howard Hansen, an immunologist at Washington University in St. Louis and Roger Hansen, an engineer in water resource management. His father, Roger Gaurth Hansen, served as provost of Utah State University and was a professor of biochemistry.


Hansen is best known as the developer of the econometric technique generalized method of moments (GMM) and has written and co-authored papers applying GMM to analyze economic models in numerous fields including labor economics, international finance, finance and macroeconomics. This method has been widely adopted in economics and other fields and applications where fully specifying and solving a model of a complex economic environment is unwieldy or otherwise impractical. Hansen showed how to exploit moment conditions (e.g. relations where conditional expectations are known to be zero at true parameter values) to construct reasonable, reliable estimators (i.e. having desirable statistical properties such as consistency, asymptotic normality, and efficiency within the class of all asymptotic normal estimators) with less stringent maintained model assumptions than needed for maximum likelihood estimation. However, these estimators are mathematically equivalent to those based on "orthogonality conditions" (Sargan, 1958, 1959) or "unbiased estimating equations" (Huber, 1967; Wang et al., 1997). Moreover, maximum likelihood estimation methods provide guidance for devising more efficient instrumental variables estimators that take into account special features such as restrictions on the variance-covariance matrices of the errors (Bhargava and Sargan, 1983).

With several coauthors such as Kenneth J. Singleton, Scott F. Richard, and Robert Hodrick, Hansen applied GMM to study models of asset valuation. Together with Ravi Jagannathan he showed that the ratio of any stochastic discount factor's standard deviation to its mean is at least as great as any asset's Sharpe ratio; this result is known as the Hansen–Jagannathan bound. The fact that this often fails in practice due to the Sharpe ratio of risky assets exceeding the ratio of the volatility of the stochastic discount factor to its expectation is known as the equity premium puzzle. Later work focused on the long-run risk-return tradeoff with José Scheinkman and the examination of the term structure of pricing risk shocks in dynamic macroeconomic models through the use of "dynamic valuation decomposition."

Thomas J. Sargent and Hansen coauthored Robustness, which explores implications of robust control theory for macroeconomic modeling when the decision maker is skeptical of any single statistical model's ability to capture how decisions are linked to outcomes.

Hansen has focused on the difference between risk and uncertainty (also known as Knightian uncertainty) and on the measurement of so-called systemic risk," its role in the 2008 financial crisis, [7] and how it should be contained during the post-Great Recession recovery. [8] He frequently speaks publicly on the need to address uncertainty in the policy-making process.

His contributions and current research interests are outlined in a December 2015 interview appearing in The Region, a publication of the Federal Reserve Bank of Minneapolis.


Hansen is the inaugural director and of the Becker Friedman Institute and the current director of BFI's Macro Finance Research Program (MFR). He was founding director of the Milton Friedman Institute, the predecessor of the Becker Friedman Institute. In 2018, Hansen wrote a retrospective essay reflecting on the Beginnings of the Becker Friedman Institute for Research in Economics, With M.I.T. economist Andrew Lo, Hansen leads the Macro Financial Modeling Group, a network of macroeconomists working to develop improved models of the linkages between the financial and real sectors of the economy in the wake of the 2008 financial crisis. He also is co-principal investigator on a research initiative studying the costs of uncertainty about economic policy.

He is a member of the National Academy of Sciences [9] and the American Finance Association. He also is a member of the American Academy of Arts and Sciences, a distinguished fellow of the Macro Finance Society, and past president of the Econometrics Society. He is the coeditor of "Advances in Economics and Econometrics," and the "Handbook of Financial Econometrics." He is one of the founders of The Society for Financial Econometrics (SoFiE) [10]

He is the co-winner of the Frisch Medal with Kenneth Singleton in 1984 for his paper, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models". [11] For his work in studying the properties of financial markets and macroeconomics, he was the 2006 Erwin Plein Nemmers Prize in Economics recipient. [12] He was recognized for his use of statistical methods in economics by receiving the CME Group-MSRI Prize In Innovative Quantitative Applications in 2008. [13] In 2011, he was awarded the BBVA Foundation Frontiers of Knowledge Award in Economics, Finance, and Management "for making fundamental contributions to our understanding of how economic actors cope with risky and changing environments." [14] He holds honorary doctorates from Utah State University and honorary professorships from HEC Paris and Universidad del Pacífico awarded in 2015. On May 22, 2016, Hansen received an honorary degree from Colby College in Waterville, Maine. [15]

Nobel Memorial Prize

On October 14, 2013, Hansen, with Eugene Fama and Robert Shiller, was awarded the Nobel Memorial Prize in Economic Sciences. [16] The award cited their "empirical analysis of asset prices." His Nobel lecture, "Uncertainty Inside and Outside Economic Models," was delivered on December 8, 2013. [17]

Selected writings

Related Research Articles

Econometrica is a peer-reviewed academic journal of economics, publishing articles in many areas of economics, especially econometrics. It is published by Wiley-Blackwell on behalf of the Econometric Society. The current editor-in-chief is Guido Imbens.

<span class="mw-page-title-main">Clive Granger</span> British Economist

Sir Clive William John Granger was a British econometrician known for his contributions to nonlinear time series analysis. He taught in Britain, at the University of Nottingham and in the United States, at the University of California, San Diego. Granger was awarded the Nobel Memorial Prize in Economic Sciences in 2003 in recognition of the contributions that he and his co-winner, Robert F. Engle, had made to the analysis of time series data. This work fundamentally changed the way in which economists analyse financial and macroeconomic data.

<span class="mw-page-title-main">Edward C. Prescott</span> American economist (1940–2022)

Edward Christian Prescott was an American economist. He received the Nobel Memorial Prize in Economics in 2004, sharing the award with Finn E. Kydland, "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles". This research was primarily conducted while both Kydland and Prescott were affiliated with the Graduate School of Industrial Administration at Carnegie Mellon University. According to the IDEAS/RePEc rankings, he was the 19th most widely cited economist in the world in 2013. In August 2014, Prescott was appointed an Adjunct Distinguished Economic Professor at the Australian National University (ANU) in Canberra, Australia. Prescott died of cancer on November 6, 2022, at the age of 81.

<span class="mw-page-title-main">John B. Taylor</span> American economist (born 1946)

John Brian Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University, and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution.

<span class="mw-page-title-main">Thomas J. Sargent</span> American economist

Thomas John Sargent is an American economist and the W.R. Berkley Professor of Economics and Business at New York University. He specializes in the fields of macroeconomics, monetary economics, and time series econometrics. As of 2020, he ranks as the 29th most cited economist in the world. He was awarded the Nobel Memorial Prize in Economics in 2011 together with Christopher A. Sims for their "empirical research on cause and effect in the macroeconomy".

Financial econometrics is the application of statistical methods to financial market data. Financial econometrics is a branch of financial economics, in the field of economics. Areas of study include capital markets, financial institutions, corporate finance and corporate governance. Topics often revolve around asset valuation of individual stocks, bonds, derivatives, currencies and other financial instruments.

In econometrics and statistics, the generalized method of moments (GMM) is a generic method for estimating parameters in statistical models. Usually it is applied in the context of semiparametric models, where the parameter of interest is finite-dimensional, whereas the full shape of the data's distribution function may not be known, and therefore maximum likelihood estimation is not applicable.

Kenneth Jan Singleton is an American economist. He is a leading figure in empirical financial economics, and a faculty member at Stanford University. As the Adams Distinguished Professor of Management, Emeritus at Stanford Graduate School of Business, Singleton teaches a variety of degree courses in finance.

<span class="mw-page-title-main">Christopher A. Sims</span> American econometrician and macroeconomist

Christopher Albert Sims is an American econometrician and macroeconomist. He is currently the John J.F. Sherrerd '52 University Professor of Economics at Princeton University. Together with Thomas Sargent, he won the Nobel Memorial Prize in Economic Sciences in 2011. The award cited their "empirical research on cause and effect in the macroeconomy".

The Frisch Medal is an award in economics given by the Econometric Society. It is awarded every two years for empirical or theoretical applied research published in Econometrica during the previous five years. The award was named in honor of Ragnar Frisch, first co-recipient of the Nobel prize in economics and editor of Econometrica from 1933 to 1954. In the opinion of Rich Jensen, Gilbert F. Schaefer Professor of Economics and chairperson of the Department of Economics of the University of Notre Dame, "The Frisch medal is not only one of the top three prizes in the field of economics, but also the most prestigious 'best article' award in the profession". Five Frisch medal winners have also won the Nobel Prize.

Sir David Forbes Hendry, FBA CStat is a British econometrician, currently a professor of economics and from 2001 to 2007 was head of the Economics Department at the University of Oxford. He is also a professorial fellow at Nuffield College, Oxford.

Dynamic stochastic general equilibrium modeling is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis, explaining historical time-series data, as well as future forecasting purposes. DSGE econometric modelling applies general equilibrium theory and microeconomic principles in a tractable manner to postulate economic phenomena, such as economic growth and business cycles, as well as policy effects and market shocks.

The Sargan–Hansen test or Sargan's test is a statistical test used for testing over-identifying restrictions in a statistical model. It was proposed by John Denis Sargan in 1958, and several variants were derived by him in 1975. Lars Peter Hansen re-worked through the derivations and showed that it can be extended to general non-linear GMM in a time series context.

The Erwin Plein Nemmers Prize in Economics is awarded biennially from Northwestern University. It was initially endowed along with a companion prize, the Frederic Esser Nemmers Prize in Mathematics. Both are part a $14 million donation from the Nemmers brothers, who envisioned creating an award that would be as prestigious as the Nobel prize. Eight out of the past 15 Nemmers economics prize winners have gone on to win a Nobel Prize : Peter Diamond, Thomas J. Sargent, Robert Aumann, Daniel McFadden, Edward C. Prescott, Lars Peter Hansen, Jean Tirole and, most recently, Paul R. Milgrom. Those who already have won a Nobel Prize are ineligible to receive a Nemmers prize. The Nemmers prizes are given in recognition of major contributions to new knowledge or the development of significant new modes of analysis in the respective disciplines. As of 2022, the prize carries a $200,000 stipend, among the largest monetary awards in the United States for outstanding achievements in economics.

Jacques H. Drèze was a Belgian economist noted for his contributions to economic theory, econometrics, and economic policy as well as for his leadership in the economics profession. Drèze was the first President of the European Economic Association in 1986 and was the President of the Econometric Society in 1970.

Pietro Balestra was a Swiss economist specializing in econometrics. He was born in Lugano and earned a B.A. in economics from the University of Fribourg. Balestra moved for graduate work to the University of Kansas and Stanford University. He was awarded the Ph.D. in Economics by Stanford University in 1965.

<span class="mw-page-title-main">Jan Kmenta</span>

Jan Kmenta was a Czech-American economist. He was the Professor Emeritus of Economics and Statistics at the University of Michigan and Visiting Professor at CERGE-EI in Prague, until summer 2016.

John Denis Sargan, FBA was a British econometrician who specialized in the analysis of economic time-series.

Manuel Arellano is a Spanish economist specialising in econometrics and empirical microeconomics. Together with Stephen Bond, he developed the Arellano–Bond estimator, a widely used GMM estimator for panel data. This estimator is based on the earlier article by Arellano's PhD supervisor, John Denis Sargan, and Alok Bhargava. RePEc lists the paper about the Arellano-Bond estimator as the most cited article in economics.

<span class="mw-page-title-main">Michael Keane (economist)</span> American/Australian economist (born 1961)

Michael Patrick Keane is an American/Australian economist who is currently professor of economics and Australian Research Council laureate fellow at the University of New South Wales. From 2012 to 2017 he was the Nuffield Professor of Economics at the University of Oxford and a professorial fellow of Nuffield College. He is considered one of the world's leading experts in the fields of Choice Modelling, structural modelling, simulation estimation, and panel data econometrics.


  1. "Past PhD Students". Becker Friedman Institute. Archived from the original on May 3, 2016. Retrieved May 7, 2016.
  2. "Lars Peter Hansen - Facts". Retrieved January 23, 2017.
  3. The Prize in Economic Sciences 2013,, retrieved October 14, 2013
  4. "3 US Economists Win Nobel for Work on Asset Prices", abc news, October 14, 2013
  5. Archived January 22, 2015, at the Wayback Machine ,
  6. Cartwright, Maren (April 26, 2012). "Four Prominent Individuals to Receive Honorary Degrees from USU". Utah State University. Retrieved October 15, 2013.
  7. Hansen, Lars Peter (February 11, 2013). Challenges in Identifying and Measuring Systemic Risk, University of Chicago and the NBER
  8. Anne Szustek (May 24, 2014). Economist-Lars-Peter-Hansen-Finds-Fault-with-Economic.html, Economist Lars Peter Hansen Finds Fault with Economic Models, Institutional Investor (magazine)
  9. "Lars Peter Hansen".
  10. Past Presidents, Founding Council, and Founding Members | The Society for Financial Econometrics
  11. "Awards | the Econometric Society".
  12. "2006 Erwin Plein Nemmers Economics Prize Recipient: Nemmers Prize - Northwestern University".
  13. "Mathematical Sciences Research Institute".
  14. "BBVA Foundation Frontiers of Knowledge Awards". Archived from the original on November 10, 2013. Retrieved November 10, 2013.
  15. "Honorary Degree Citations". Commencement. May 22, 2016. Retrieved June 10, 2016.
  16. "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013".
  17. "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013".
  18. Uncertainty Within Economic Models. World Scientific Publishing. 2014. ISBN   9789814578110.
  19. Hansen, Lars Peter (2014). "Uncertainty Outside and Inside Economic Models" (PDF). Journal of Political Economy. 122 (5): 945–987. doi:10.1086/678456. S2CID   16318044.
  20. Recursive Models of Dynamic Linear Economies. Princeton University Press. 2013. ISBN   9780691042770.
  21. Robustness. Princeton University Press. 2007. ISBN   9780691114422.
  22. Risk Topography: Systemic Risk and Macro Modeling. Chicago: University of Chicago Press. November 2012.

Further reading

Preceded by Laureate of the Nobel Memorial Prize in Economics
Served alongside: Eugene F. Fama, Robert J. Shiller
Succeeded by