Robert F. Engle
Encyclopedia
Robert Fry Engle III is an American
economist
and the winner of the 2003 Nobel Memorial Prize in Economic Sciences
, sharing the award with Clive Granger
, "for methods of analyzing economic time series
with time-varying volatility
(ARCH
)".
and went on to graduate from Williams College
with a B.S.
in physics. He earned an M.S.
in physics and a Ph.D.
in economics, both from Cornell University
in 1966 and 1969 respectively. After completing his Ph.D., Engle became Professor of Economics at the Massachusetts Institute of Technology
from 1969 to 1977. He joined the faculty of the University of California, San Diego
(UCSD) in 1975, wherefrom he retired in 2003. He now holds positions of Professor Emeritus and Research Professor at UCSD. He currently teaches at New York University
, Stern School of Business where he is the Michael Armellino professor in Management of Financial Services. At New York University
, Engle teaches for the Master of Science in Risk Management Program for Executives
, which is offered in partnership with the Amsterdam Institute of Finance
.
Engle’s most important contribution was his path-breaking discovery of a method for analyzing unpredictable movements in financial market prices and interest rates. Accurate characterization and prediction of these volatile movements are essential for quantifying
and effectively managing risk
. For example, risk measurement plays a key role in pricing
options
and financial derivatives. Previous researchers had either assumed constant
volatility
or had used simple devices to approximate it. Engle developed new statistical
models of volatility that captured the tendency of stock prices and other financial
variables to move between high volatility and low volatility periods (“Autoregressive
Conditional Heteroskedasticity: ARCH”). These statistical models have become essential
tools of modern arbitrage pricing theory
and practice.
More recently, Engle (and Eric Ghysels
) co-founded the Society for Financial Econometrics (SoFiE).
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
and the winner of the 2003 Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
, sharing the award with Clive Granger
Clive Granger
Sir Clive William John Granger was a British economist, who taught in Britain at the University of Nottingham and in the U.S.A. at the University of California, San Diego. In 2003, Granger was awarded the Nobel Memorial Prize in Economic Sciences, in recognition that he and his co-winner, Robert F...
, "for methods of analyzing economic time series
Time series
In statistics, signal processing, econometrics and mathematical finance, a time series is a sequence of data points, measured typically at successive times spaced at uniform time intervals. Examples of time series are the daily closing value of the Dow Jones index or the annual flow volume of the...
with time-varying volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
(ARCH
Autoregressive conditional heteroskedasticity
In econometrics, AutoRegressive Conditional Heteroskedasticity models are used to characterize and model observed time series. They are used whenever there is reason to believe that, at any point in a series, the terms will have a characteristic size, or variance...
)".
Biography
Engle was born in Syracuse, New YorkSyracuse, New York
Syracuse is a city in and the county seat of Onondaga County, New York, United States, the largest U.S. city with the name "Syracuse", and the fifth most populous city in the state. At the 2010 census, the city population was 145,170, and its metropolitan area had a population of 742,603...
and went on to graduate from Williams College
Williams College
Williams College is a private liberal arts college located in Williamstown, Massachusetts, United States. It was established in 1793 with funds from the estate of Ephraim Williams. Originally a men's college, Williams became co-educational in 1970. Fraternities were also phased out during this...
with a B.S.
Bachelor of Science
A Bachelor of Science is an undergraduate academic degree awarded for completed courses that generally last three to five years .-Australia:In Australia, the BSc is a 3 year degree, offered from 1st year on...
in physics. He earned an M.S.
Master of Science
A Master of Science is a postgraduate academic master's degree awarded by universities in many countries. The degree is typically studied for in the sciences including the social sciences.-Brazil, Argentina and Uruguay:...
in physics and a Ph.D.
Ph.D.
A Ph.D. is a Doctor of Philosophy, an academic degree.Ph.D. may also refer to:* Ph.D. , a 1980s British group*Piled Higher and Deeper, a web comic strip*PhD: Phantasy Degree, a Korean comic series* PhD Docbook renderer, an XML renderer...
in economics, both from Cornell University
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
in 1966 and 1969 respectively. After completing his Ph.D., Engle became Professor of Economics at the Massachusetts Institute of Technology
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...
from 1969 to 1977. He joined the faculty of the University of California, San Diego
University of California, San Diego
The University of California, San Diego, commonly known as UCSD or UC San Diego, is a public research university located in the La Jolla neighborhood of San Diego, California, United States...
(UCSD) in 1975, wherefrom he retired in 2003. He now holds positions of Professor Emeritus and Research Professor at UCSD. He currently teaches at New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
, Stern School of Business where he is the Michael Armellino professor in Management of Financial Services. At New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
, Engle teaches for the Master of Science in Risk Management Program for Executives
Master of Science in Risk Management Program for Executives
The Master of Science in Risk Management Program for Executives is a joint-venture with NYU's Stern School of Business and the Amsterdam Institute of Finance...
, which is offered in partnership with the Amsterdam Institute of Finance
Amsterdam Institute of Finance
The Amsterdam Institute of Finance, or AIF, is a financial training and education institute in the Netherlands with a focus on global programs. The AIF, which operates as a non-profit foundation, was founded in 1990 as a joint venture between government officials and the Dutch financial...
.
Engle’s most important contribution was his path-breaking discovery of a method for analyzing unpredictable movements in financial market prices and interest rates. Accurate characterization and prediction of these volatile movements are essential for quantifying
and effectively managing risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
. For example, risk measurement plays a key role in pricing
options
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
and financial derivatives. Previous researchers had either assumed constant
volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
or had used simple devices to approximate it. Engle developed new statistical
models of volatility that captured the tendency of stock prices and other financial
variables to move between high volatility and low volatility periods (“Autoregressive
Conditional Heteroskedasticity: ARCH”). These statistical models have become essential
tools of modern arbitrage pricing theory
Arbitrage pricing theory
In finance, arbitrage pricing theory is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various macro-economic factors or theoretical market indices, where sensitivity to changes in each factor is represented by a...
and practice.
More recently, Engle (and Eric Ghysels
Eric Ghysels
Eric Ghysels is an economist with particular interest in finance and time series econometrics who works in the field of financial econometrics and is currently the Edward M...
) co-founded the Society for Financial Econometrics (SoFiE).
Personal life
- Paternal Grandfather Robert Fry Engle, Sr. (b. 1879 d. 1946)
- Father Robert Fry Engle, Jr. (b. 1910 d. 1981, DuPontDuPontE. I. du Pont de Nemours and Company , commonly referred to as DuPont, is an American chemical company that was founded in July 1802 as a gunpowder mill by Eleuthère Irénée du Pont. DuPont was the world's third largest chemical company based on market capitalization and ninth based on revenue in 2009...
chemist) - Mother Mary Starr Engle ("Murry", French teacher, m. 1939)
- Sister Patricia Lee Engle ("Patty", twin, UNICEFUnited Nations Children's FundUnited Nations Children's Fund was created by the United Nations General Assembly on December 11, 1946, to provide emergency food and healthcare to children in countries that had been devastated by World War II...
official) - Sister Sally Starr Engle Merry (anthropologistAnthropologyAnthropology is the study of humanity. It has origins in the humanities, the natural sciences, and the social sciences. The term "anthropology" is from the Greek anthrōpos , "man", understood to mean mankind or humanity, and -logia , "discourse" or "study", and was first used in 1501 by German...
, twin) - Wife Marianne Eger Engle (psychologistPsychologistPsychologist is a professional or academic title used by individuals who are either:* Clinical professionals who work with patients in a variety of therapeutic contexts .* Scientists conducting psychological research or teaching psychology in a college...
, m. 10-Aug-1969, two children) - Daughter Lindsey Engle Richland (psychologistPsychologistPsychologist is a professional or academic title used by individuals who are either:* Clinical professionals who work with patients in a variety of therapeutic contexts .* Scientists conducting psychological research or teaching psychology in a college...
) - Son Jordan Engle (actorActorAn actor is a person who acts in a dramatic production and who works in film, television, theatre, or radio in that capacity...
, b. May-1980)
Publications
- Autoregressive Conditional Heteroskedasticity With Estimates of the Variance of UK Inflation Econometrica 50 (1982): 987-1008.
- Estimation of Time Varying Risk Premia in the Term Structure: the ARCH-M Model (with David Lilien and Russell Robins), Econometrica 55 (1987): 391-407.
- Co-integration and Error Correction: Representation, Estimation and Testing (with Clive GrangerClive GrangerSir Clive William John Granger was a British economist, who taught in Britain at the University of Nottingham and in the U.S.A. at the University of California, San Diego. In 2003, Granger was awarded the Nobel Memorial Prize in Economic Sciences, in recognition that he and his co-winner, Robert F...
), Econometrica 55 (1987): 251-276. - Semi-parametric estimates of the relation between weather and electricity demand (with C. Granger, J. Rice and A. Weiss), Journal of American Statistical Association 81 (1986): 310-320.
- Exogeneity (with David F. Hendry and Jean-Francois Richard), Econometrica 51 (1983): 277-304.
- Asset Pricing with a Factor ARCH Covariance Structure: Empirical Estimates for Treasury Bills (with V. Ng, and M. Rothschild) Journal of Econometrics 45 (1990): 213-237.
- Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data, (with J.R. Russell) Econometrica 66 (1998):1127-1162.
- Dynamic Conditional Correlation - A Simple Class of Multivariate GARCH Models Journal of Business and Economic Statistics (July 2002)