Advisor / SparkLabs Group
Lars Peter Hansen is a leading expert in economic dynamics who works at the forefront of economic thinking and modeling, drawing approaches from macroeconomics, finance, and statistics. He is a recipient of the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
Hansen has made fundamental advances in our understanding of how economic agents cope with changing and risky environments. He has contributed to the development of statistical methods designed to explore the interconnections between macroeconomic indicators and assets in financial markets. These methods are widely used in empirical research in financial economics today.
The Nobel Prize recognizes this work, which has been used to test theories and models that have shaped our modern understanding of asset pricing. His recent research explores how to quantify intertemporal risk-return tradeoffs and ways to model economic behavior when consumers and investors struggle with uncertainty about the future. Improving models that measure risk and uncertainty have important implications for financial markets, fiscal policy, and the macroeconomy.
His early research in econometrics was aimed at developing time series statistical methods to investigate one part of an economic model without having to fully specify and estimate all of the model ingredients. The applications he explored with several coauthors, such as Kenneth J. Singleton, Scott F. Richard, Robert Hodrick, and Ravi Jagannathan, included systems that are rich enough to support models of asset valuation and to identify and clarify empirical puzzles, where real-world financial and economic data were at odds with prevailing academic models.
Hansen’s recent work focuses on uncertainty and its relationship to long run risks in the macroeconomy. He explores how models that incorporate ambiguities, beliefs, and skepticism of consumers and investors can explain economic and financial data and reveal the long-term consequences of policy options. Hansen, Thomas J. Sargent, and their coauthors have recently developed methods for modeling economic decision-making in environments in which uncertainty is hard to quantify. .