Lars Peter Hansen

After graduating from Utah State University (B.S. Mathematics, Political Science, 1974) and the University of Minnesota (Ph.D. Economics, 1978), he served as assistant and associate professor at Carnegie Mellon University before moving to the University of Chicago in 1981. He is currently the David Rockefeller Distinguished Service Professor in Economics, Statistics and the College at the University of Chicago. He is married to Grace Tsiang ({{lang-zh|s=蒋人瑞|p=Jiǎng Rénruì}}), who is the daughter of the famous economist Sho-Chieh Tsiang. Together, Hansen and Tsiang have one son named Peter.{{cite web | url=http://usu.edu/ust/index.cfm?article=51098 | title=Four Prominent Individuals to Receive Honorary Degrees from USU | publisher=Utah State University | date=April 26, 2012 | access-date=October 15, 2013 | author=Cartwright, Maren}} He has two brothers, Ted Howard Hansen, an immunologist at Washington University in St. Louis and Roger Hansen, an engineer in water resource management. His father, Roger Gaurth Hansen, served as provost of Utah State University and was a professor of biochemistry.

Hansen is best known as the developer of the econometric technique generalized method of moments (GMM) and has written and co-authored papers applying GMM to analyze economic models in numerous fields including labor economics, international finance, finance and macroeconomics. This method has been widely adopted in economics and other fields and applications where fully specifying and solving a model of a complex economic environment is unwieldy or otherwise impractical. Hansen showed how to exploit moment conditions (e.g. relations where conditional expectations are known to be zero at true parameter values) to construct reasonable, reliable estimators (i.e. having desirable statistical properties such as consistency, asymptotic normality, and efficiency within the class of all asymptotic normal estimators) with less stringent maintained model assumptions than needed for maximum likelihood estimation. However, these estimators are mathematically equivalent to those based on "orthogonality conditions" (Sargan, 1958, 1959) or "unbiased estimating equations" (Huber, 1967; Wang et al., 1997). Moreover, maximum likelihood estimation methods provide guidance for devising more efficient instrumental variables estimators that take into account special features such as restrictions on the variance-covariance matrices of the errors (Bhargava and Sargan, 1983).

With several coauthors such as Kenneth J. Singleton, Scott F. Richard, and Robert Hodrick, Hansen applied GMM to study models of asset valuation. Together with Ravi Jagannathan he showed that the ratio of any stochastic discount factor's standard deviation to its mean is at least as great as any asset's Sharpe ratio; this result is known as the Hansen–Jagannathan bound. The fact that this often fails in practice due to the Sharpe ratio of risky assets exceeding the ratio of the volatility of the stochastic discount factor to its expectation is known as the equity premium puzzle. Later work focused on the long-run risk-return tradeoff with José Scheinkman and the examination of the term structure of pricing risk shocks in dynamic macroeconomic models through the use of "dynamic valuation decomposition."

Thomas J. Sargent and Hansen coauthored Robustness, which explores implications of robust control theory for macroeconomic modeling when the decision maker is skeptical of any single statistical model's ability to capture how decisions are linked to outcomes.

Hansen has focused on the difference between risk and uncertainty{{cite web | url=http://bfi.uchicago.edu/research/published-research/three-types-ambiguity | title=Looking Beyond the Streetlamps }} (also known as Knightian uncertainty) and on the measurement of so-called systemic risk," its role in the 2008 financial crisis,Hansen, Lars Peter (February 11, 2013). [https://www.nber.org/chapters/c12507.pdf Challenges in Identifying and Measuring Systemic Risk], University of Chicago and the NBER and how it should be contained during the post-Great Recession recovery.{{cite web | first=Anne | last=Szustek | date=May 24, 2014 | title=Economist Lars Peter Hansen Finds Fault with Economic Models | work=Institutional Investor | publication-place=New York City | publisher=Euromoney Institutional Investor | issn=0020-3580 | url=https://www.institutionalinvestor.com/article/2bsunjj1auy86najtpl34/portfolio/economist-lars-peter-hansen-finds-fault-with-economic-models}} He frequently speaks publicly on the need to address uncertainty in the policy-making process.

His contributions and current research interests are outlined in a December 2015 interview{{cite web | last=Clement | first=Douglas | date=December 17, 2015 | title=Interview with Lars Peter Hansen | work=The Region | publisher=Federal Reserve Bank of Minneapolis | url=https://www.minneapolisfed.org/publications/the-region/interview-with-lars-peter-hansen | archive-url=https://web.archive.org/web/20190725035213/https://www.minneapolisfed.org/publications/the-region/interview-with-lars-peter-hansen | archive-date=July 25, 2019 }} appearing in The Region, a publication of the Federal Reserve Bank of Minneapolis.

Hansen is the inaugural director of the Becker Friedman Institute

and the current director of BFI's Macro Finance Research Program (MFR).{{cite web | url=https://bfi.uchicago.edu/programs/macro-finance-research-program/ | title=Macro Finance Research Program }} He was founding director of the Milton Friedman Institute, the predecessor of the Becker Friedman Institute. In 2018, Hansen wrote a retrospective essayhttp://larspeterhansen.org/wp-content/uploads/2018/09/BFI320318_Lars-Peter_Hansen-BFI_Interactive_TOC.pdf reflecting on the Beginnings of the Becker Friedman Institute for Research in Economics, With M.I.T. economist Andrew Lo, Hansen leads the Macro Financial Modeling Group, a network of macroeconomists working to develop improved models of the linkages between the financial and real sectors of the economy after the 2008 financial crisis. He also is co-principal investigator on a research initiative studying the costs of uncertainty about economic policy.{{cite web | url=http://bfi.uchicago.edu/initiative/price-policy-uncertainty | title=The Price of Policy Uncertainty | Becker Friedman Institute }}

He is a member of the National Academy of Sciences{{Cite web | url=http://www.nasonline.org/member-directory/members/3006333.html | title=Lars Peter Hansen}} and the American Finance Association. He also is a member of the American Academy of Arts and Sciences, a distinguished fellow of the Macro Finance Society, and past president of the Econometrics Society. He is the coeditor of "Advances in Economics and Econometrics," and the "Handbook of Financial Econometrics." He is one of the founders of The Society for Financial Econometrics (SoFiE){{Cite web |url=http://sofie.stern.nyu.edu/founding.members |title=Past Presidents, Founding Council, and Founding Members {{!}} The Society for Financial Econometrics |access-date=October 16, 2013 |archive-date=April 3, 2019 |archive-url=https://web.archive.org/web/20190403192544/http://sofie.stern.nyu.edu/founding.members |url-status=dead }}

He is the co-winner of the Frisch Medal with Kenneth Singleton in 1984 for his paper, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models".{{Cite web | url=https://www.econometricsociety.org/society/awards | title=Awards | the Econometric Society}} For his work in studying the properties of financial markets and macroeconomics, he was the 2006 Erwin Plein Nemmers Prize in Economics recipient.{{Cite web | url=https://www.nemmers.northwestern.edu/prizes/2006hansen.html |title = 2006 Erwin Plein Nemmers Economics Prize Recipient: Nemmers Prize - Northwestern University}} He was recognized for his use of statistical methods in economics by receiving the CME Group-MSRI Prize In Innovative Quantitative Applications in 2008.{{Cite web | url=https://www.msri.org/general_events/18628 |title = Mathematical Sciences Research Institute}} In 2011, he was awarded the BBVA Foundation Frontiers of Knowledge Award in Economics, Finance, and Management "for making fundamental contributions to our understanding of how economic actors cope with risky and changing environments."{{Cite web |url=http://www.fbbva.es/TLFU/tlfu/ing/microsites/premios/fronteras/galardonados/2010/economia.jsp |title=BBVA Foundation Frontiers of Knowledge Awards |access-date=November 10, 2013 |archive-url=https://web.archive.org/web/20131110114920/http://www.fbbva.es/TLFU/tlfu/ing/microsites/premios/fronteras/galardonados/2010/economia.jsp |archive-date=November 10, 2013 |url-status=dead |df=mdy-all }} He holds honorary doctorates from Utah State University and honorary professorships from HEC Paris and Universidad del Pacífico awarded in 2015. On May 22, 2016, Hansen received an honorary degree from Colby College in Waterville, Maine.{{Cite web|url=http://www.colby.edu/commencement/2016/honorary-degree-citations/|title=Honorary Degree Citations|date=2016-05-22|website=Commencement|language=en-US|access-date=2016-06-10}}

On October 14, 2013, Hansen, with Eugene Fama and Robert Shiller, was awarded the Nobel Memorial Prize in Economic Sciences.{{Cite web | url=https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/hansen-lecture.html | title=The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013}} The award cited their "empirical analysis of asset prices." His Nobel lecture, "Uncertainty Inside and Outside Economic Models," was delivered on December 8, 2013.{{Cite web | url=https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/hansen-lecture.html | title=The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013}}

Lars Peter Hansen's favorite pie is pumpkin pie.{{Cite web |title=How Much Would it Cost to Save the Rainforest? |url=https://bfi.uchicago.edu/podcast/how-much-would-it-cost-to-save-the-rainforest/ |access-date=2024-11-23 |website=BFI |language=en-US}}

• Hansen, L.P. and J. Borovička, "Term Structure of Uncertainty in the Macroeconomy," in "Handbook of Macroeconomics," Vol. 2, Part 2., eds. J.B. Taylor, H. Uhlig., December 2016.
• Hansen, L.P., J. Borovička and J. Scheinkman "Misspecified Recovery," Journal of Finance, March 2016.
• Hansen, L.P. and Sargent, T.J. Uncertainty Within Economic Models.{{cite book|title=Uncertainty Within Economic Models|date=2014|publisher=World Scientific Publishing|isbn=9789814578110}} World Scientific Publishing 2014.
• Hansen, L.P. "Uncertainty Inside and Outside Economic Models{{cite journal|last1=Hansen|first1=Lars Peter|title=Uncertainty Outside and Inside Economic Models|journal=Journal of Political Economy|volume=122|issue=5|pages=945–987|url=http://bfi.uchicago.edu/sites/default/files/research/Uncertainty%20Outside%20and%20Inside%20Economic%20Models.pdf|doi=10.1086/678456|year=2014|s2cid=16318044}}" (Nobel Lecture)
• Hansen, L.P. and Sargent, T.J. Recursive Models of Dynamic Linear Economies{{cite book|title=Recursive Models of Dynamic Linear Economies|date=2013|publisher=Princeton University Press|isbn=9780691042770}}. Princeton University Press 2013.
• Hansen, L.P. and Sargent, T.J. Robustness{{cite book|title=Robustness|date=2007|publisher=Princeton University Press|isbn=9780691114422}} Princeton University Press 2007.
• Hansen, L.P. "Challenges in Identifying and Measuring Systemic Risk," in Brunnermeier, M.K. and Krishnamurthy, A.: Risk Topography: Systemic Risk and Macro Modeling,{{cite book|title=Risk Topography: Systemic Risk and Macro Modeling|date=Nov 2012|publisher=University of Chicago Press|location=Chicago}} September 2012.
• Hansen, L.P. "Generalized Methods of Moments: A Time Series Perspective," in International Encyclopedia of the Social and Behavior Sciences, 2000.
• Hansen, L.P., (1982), "Large Sample Properties of Generalized Methods of Moments Estimators" in Econometrica, Vol. 50, page 1029–1054, where he proposed the GMM-procedure.
• {{Cite journal | doi = 10.1086/261749 | last1 = Hansen | first1 = L. P. | last2 = Jagannathan | first2 = R. | year = 1991 | title = Implications of Security Market Data for Models of Dynamic Economies | url = http://minneapolisfed.org/research/DP/DP29.pdf| journal = Journal of Political Economy | volume = 99 | issue = 2| pages = 225–262 | s2cid = 155085294 }}
• {{Cite journal | doi = 10.2307/1911873 | last1 = Hansen | first1 = L. P. | last2 = Singleton | first2 = K.J. | year = 1982 | title = Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models | jstor = 1911873| journal = Econometrica | volume = 50 | issue = 5| pages = 1269–86 }}
• {{Cite journal | doi = 10.1086/260910 | last1 = Hansen | first1 = L.P. | last2 = Hodrick | first2 = R.J. | year = 1980 | title = Forward Exchange-Rates As Optimal Predictors of Future Spot Rates - An Econometric-Analysis | journal = Journal of Political Economy | volume = 88 | issue = 5| pages = 829–853 | s2cid = 152551684 }}
• {{Cite journal | last1 = Hansen | first1 = L.P. | last2 = Sargent | first2 = T.J. | year = 1980 | title = Formulating and Estimating Dynamic Linear Rational-Expectations Models | url = http://www.minneapolisfed.org/research/WP/WP127.pdf| journal = Journal of Economic Dynamics & Control | volume = 2 | issue = 7–46| page = 1980 | doi=10.1016/0165-1889(80)90049-4}}
• {{Cite journal | doi = 10.1086/588200 | last1 = Hansen | first1 = L.P. | last2 = Heaton | first2 = J.C. | last3 = Li | first3 = N. | year = 2008 | title = Consumption Strikes Back? Measuring Long-Run Risk | journal = Journal of Political Economy | volume = 116 | issue = 2| pages = 260–302 | citeseerx = 10.1.1.516.4176 | s2cid = 17126418 }}
• {{Cite journal | doi = 10.1016/j.jet.2006.06.010 | last1 = Hansen | first1 = L.P. | last2 = Sargent | first2 = T.J. | year = 2007 | title = Recursive Robust Estimation and Control without Commitment | journal = Journal of Economic Theory | volume = 136 | issue = 1| pages = 1–27 | citeseerx = 10.1.1.408.2856 | s2cid = 6573826 }}
• Hansen, L.P., Sargent, T.J., (2008). Robustness. Princeton University Press.
• Hansen, L.P., Sargent, T.J., (2013). "Recursive Models of Dynamic Linear Economies." Princeton University Press.
• {{Cite journal | doi = 10.3982/ECTA6761 | last1 = Hansen | first1 = L.P. | last2 = Scheinkman | first2 = J. | year = 2009 | title = Long Term Risk: an Operator Approach," (January 2009) | journal = Econometrica | volume = 77 | issue = 1| pages = 177–234 | citeseerx = 10.1.1.484.7597 | s2cid = 119947304 }}
• {{Cite journal | last1 = Hansen | first1 = L.P. | year = 2007 | title = The Richard T. Ely Lecture : "Beliefs, Doubts and Learning: Valuing Macroeconomic Risk | journal = The American Economic Review | volume = 97 | issue = 2| pages = 1–30 | doi=10.1257/aer.97.2.1| doi-access = free }}

{{reflist}}

• Bhargava, A., and Sargan, J.D. (1983). Estimating dynamic random effects from panel data covering short time periods. Econometrica, 51, 6, 1635–1659.
• Huber, P. (1967). The behavior of maximum likelihood estimates under nonstandard conditions. Proceedings of the Fifth Berkeley Symposium on Mathematical Statistics and Probability 1, 221–233.
• Sargan, J.D. (1958). The estimation of economic relationships using instrumental variables. Econometrica, 26, 393–415.
• Sargan, J.D. (1959). The estimation of relationships with autocorrelated residuals by the use on instrumental variables. Journal of the Royal Statistical Society B, 21, 91–105.
• Wang, C.Y., Wang, S., and Carroll, R. (1997). Estimation in choice-based sampling with measurement error and bootstrap analysis. Journal of Econometrics, 77, 65–86.

{{Wikiquote}}

{{Commons category}}

• [https://www.minneapolisfed.org/publications/the-region/interview-with-lars-peter-hansen Minneapolis Fed interview in "The Region"] {{Webarchive|url=https://web.archive.org/web/20190725035213/https://www.minneapolisfed.org/publications/the-region/interview-with-lars-peter-hansen |date=July 25, 2019 }}
• [http://home.uchicago.edu/~lhansen/LarsHansenInterviewJBES.pdf American Statistical Association 2002 interview with Lars Peter Hansen]
• [http://larspeterhansen.org Personal web page]
• [http://bfi.uchicago.edu/mfm Macro Financial Modeling page]
• [http://cowles.econ.yale.edu/conferences/koopmans/tck08 Cowles Foundation Koopmans Lecture 2008]
• [http://usu.edu/ust/index.cfm?article=51098 Utah State University News article]
• [http://www.nemmers.northwestern.edu/economics.html Nemmers Prize]
• {{Nobelprize}}

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{{s-ttl | title = Laureate of the Nobel Memorial Prize in Economics | years = 2013 | alongside = Eugene F. Fama, Robert J. Shiller }}

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{{DEFAULTSORT:Hansen, Lars Peter}}

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