Hansen wins the BBVA Foundation Frontiers of Knowledge Award in Economics for devising a statistical language that tests economic theory against the empirical evidence

The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category goes in this third edition 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”, said the jury in its citation.

16 February, 2011


Lars Peter Hansen


Lars Peter Hansen: “I am working on the different ways that macroeconomic fluctuations and growth are reflected in the price of securities”

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 continues.

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 provides a linkage between economic theory and empirical evidence. 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 the pricing of financial assets, by integrating financial market performance with macroeconomics. “I am currently interested in the study of how macroeconomic fluctuations and growth are reflected in the price of securities”, informs the new Frontiers laureate.

The jury also singled out Hansen’s achievement in “bringing greater discipline to economic theory by providing the tools to test it against the empirical evidence”.

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

Born 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. From 1984 to the present, he has occupied various professorial posts at the University of Chicago.

He has mentored 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 works are Advances in economics and econometrics: theory and applications (2003) and Robustness (2007).