ISB Updates

ISB hosts Nobel Laureate Lars Peter Hansen

The celebrated  Nobel Laureate Lars Peter Hansen was at ISB on invitation to attend the ISB Summer Research Conference 2016 in Finance on July 28, 2016. The research prowess of ISB was once again on display with the meeting of some of the most active minds, in the area of research in finance.

Nobel Laureate Lars Peter Hansen is the David Rockefeller Distinguished Service Professor of economics at the University of Chicago and 2013 recipient of the Nobel Memorial Prize in Economics. He is an expert on economic dynamics and a world renowned authority on market risks.

ISB had earlier hosted the Nobel Laureate on July 25, 2016, at Mumbai at an event held under the aegis of the NSE-ISB Investment Laboratory. The conversation was moderated by Bhagwan Chowdhry, Professor of Finance at UCLA Anderson School of Management, and a regular contributor to pedagogy and thought leadership at ISB.

While interacting with captains of industry Lars Hansen spoke on the uncertainty Brexit has infused in to the financial markets and that it will take a while for the full impact on the global economy to play out. Given that financial markets are always forward looking and unfortunately investors have to make guesses, the uncertainty is likely to continue for some more time, Professor Hansen said.

Professor Hansen’s work on asset pricing models based on the General Method of Moments (GMM), for which he was awarded the Nobel Prize, helps us understand why security prices move in a particular manner, have become part of standard tool kits of institutions and universities to understand the behaviour of markets.

Perhaps people put too much faith in the information they were getting on Brexit which led to clouding of their own judgement, felt the Nobel Laureate who took questions on a range of topics from Brexit and gold as an asset class to the US monetary policy and his own record as a student in school.

Commenting on economic models and financial markets, Professor Hansen felt it would be smart for people to take steps even before they understood the dynamics of how economic models would play out. “Just because we don’t understand something does not mean we should not do something about it,” he said adding that trying to build models just to understand them better would be a false proposition. There are limits to understanding things.

Responding to a question on monetary policies with particular reference to India, the Nobel Laureate said the central banks should continue to focus on controlling inflation apart from encouraging FDI through policy intervention. At the same time central banks also need to exercise adequate oversight of the banking system as has been the case in India, he felt. Another area that India needed to address is changing labour market regulations, he added.