Eugene Fama (A 60) was this year awarded the Nobel Prize in Economics for his studies on asset pricing and market efficiency, the Nobel Committee announced in a press release on Oct. 14.
Widely respected in the field of economics, Fama is commonly known as the father of modern finance for his research on how markets operate, according to the University of Chicago Booth School of Business site. He shares the prize with economists Lars Peter Hansen of the University of Chicago and Robert Shiller of Yale University.
University President Anthony Monaco congratulated Fama on his achievement.
The award of the 2013 Nobel Prize in Economics to Tufts alumnus Eugene Fama is an incredible honor for the university, Monaco told the Daily in an email. He is known for his pioneering work in understanding how financial assets such as stocks and homes are priced, and we are very proud that this father of modern finance got his start at Tufts.
Though Famas interest in economics took root at Tufts, it came late in his academic career, according to his autobiography. Fama came to Tufts with the intention of becoming a schoolteacher and a sports coach, graduating magna cum laude with honors with a degree in romance languages.
At Tufts, I started in romance languages, but after two years became bored with re-hashing Voltaire and took an economics course, Fama wrote. I was enthralled by the subject matter and by the prospect of escaping a lifetime of starvation on the wages of a high school teacher.
Fama continued his studies at the University of Chicago Booth School of Business, where he received his Master of Business Administration and doctorate, according to the University of Chicago website. He now serves as the Robert R. McCormick Distinguished Service Professor of Finance at The Booth School.
Fama is most famous for his efficient markets hypothesis, which proposes that the market always accurately values stock, making it impossible for investors to find undervalued stocks, according to an Oct. 17 article on Forbes.com. The hypothesis also argues that it is impossible to predict stock price trends over the short term since changes in market prices happen instantaneously.
[Famas] findings not only had a profound impact on subsequent research, but also changed market practice, the Nobel Committee said in the release. The emergence of so-called index funds in stock markets all over the world is a prominent example.
Fama attributes much of his success to his undergraduate experience and professors at Tufts.
The [Tufts] professors were as inspiring as the research stars I later profited from at the University of Chicago, he said. My professors at Tufts encouraged me to go to graduate school.
Famas appreciation for his Tufts education is encouraging news for members of the university, Monaco said.
It is especially gratifying to know that his research career was sparked by working on a project with one of his Tufts professors, just as so many of our students do today, Monaco said.
This is Tufts third recognition by the Nobel Committee, according to a list compiled by the Wall Street Journal. Fama joins Roderick Mackinnon (M 82), who won for chemistry in 2003, and former physics professor Allan Cormack, who won the prize for physiology or medicine in 1979.
