Professor Hansen delivered honorary remarks about the life of Professor S.C. Tsiang and presented his paper "The Price of Macroeconomic Uncertainty with Tenuous Beliefs" at the inaugural S.C. Tsiang Macroeconomics Workshop on March 1, 2018. Sho-Chieh Tsiang, a world-renowned authority in macroeconomics, monetary theory, and international ﬁnance, was a Professor of Economics at Cornell University from 1969 until his retirement and elevation to Emeritus status in 1985. His family has graciously endowed our department's weekly Macroeconomics Workshop.
After a reception with the Tsiang Family, Department Chair Larry Blume, Professor Grace Hansen (S.C. Tsiang's daughter) and Professor Lars Peter Hansen (Son-In-Law of S.C. Tsiang) delivered honorary remarks about the life and work of S.C. Tsiang.
View their remarks below:
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. Read the rest of Professor Hansen's bio here.
"The Price of Macroeconomic Uncertainty with Tenuous Beliefs"
Later in the day, Professor Hansen presented his paper "The Price of Macroeconomic Uncertainty with Tenuous Beliefs" at the inaugural S.C. Tsiang Macroeconomics Workshop. View Professor Hansen’s lecture below:
This research illustrates the implications for forward-looking markets by taking an equilibrium pricing perspective. Struggles with uncertainty induce what looks like market sentiments that vary over the business cycle. When these views pertain to the underlying macro economy and its prospects for growth, there are consequences that emerge in financial markets. In times of weak growth, security markets reflect a concern that this weakness will endure. In times of strong growth, a market concern emerges that this strength will peter out. This asymmetry induces a form of nonlinearity in asset valuation that is reflected in a term structure of uncertainty. Uncertainty prices, which are market compensations for exposure to macroeconomic fluctuations, depend on the current growth state of the payoff horizon for alternative financial investments.
The paper shows how to capture formally uncertainty about multiple models along with the potential that each is merely an approximation. It combines previous formulations by Chen and Epstein to capture model ambiguity and by Hansen and Sargent to capture potential model misspecification. The preferences have a recursive structure and are a continuous-time version of the variational preferences of Maccheroni, Marinacci and Rustichini.