The lecture will explore characterizations of the intertemporal composition of risk in asset valuation using clearly specified economic models. It will investigate the role of the dynamic evolution of risk premia. In particular, it will show how recently developed martingale methods decompose asset values into components, interpretable as risk prices and exposures. The talk will illustrate that these methods present intriguing challenges for statistical measurement; however, these challenges highlight an important role for economic modeling. Since risk prices depend on the investment horizon, there is a term structure of macroeconomic risk underlying these prices. The talk will conclude by exploring how alternative economics models differ in respect to the dynamic structure of their implied prices over long horizons.

Lars Peter Hansen is the Homer J. Livingston Distinguished Service Professor at the University of Chicago. He earned his PhD degree in economics from the University of Minnesota in 1978. Hansen has served as a member of the faculty of Carnegie-Mellon University from 1978-1981 and at University of Chicago since 1981. He is a member of the American Academy of Arts and Sciences and the National Academy of Sciences, a fellow of the American Finance Association and is currently serving as the president of the Econometric Society. He shared the Frisch Prize with Ken Singleton in 1984, and earlier this year gave the Ely Lecture at the 2007 meetings of the American Economic Association. Hansen's research develops and applies econometric methods designed for the study of the linkages between the macro economy and financial markets. He has contributed to the development of models of asset pricing and investor choice in ways that accommodate empirical investigation. Moreover, he has developed formal methods of statistical analysis designed for the study of such models.

Return to the Nemmers Prize Home Page