Three American Economists – Eugene Fama and Lars Peter Hansen of the University of Chicago, and Robert Shiller of Yale, have won the Nobel Prize in Economics for 2013. They were awarded the coveted award for their work that helped answer this crucial question: What determines the prices of an asset, whether a stock, bond or a house?

Although Fama and Shiller are viewed as “students” of opposite schools of thought on market economy, their work earned accolade and helped resolve several unanswered questions.

Eugene Fama is an expert in “efficient markets hypothesis”. Robert Shiller works on how the markets are driven by human psychology. Hansen’s research is basically based on Shiller’s findings. He strongly established the theory that when times are bad, investors become more cautious and when times are good, more become willing to pay high prices for assets.