American, Briton win Nobel for economic study

STOCKHOLM, Sweden -- American Robert F. Engle and Briton Clive W.J. Granger won the Nobel Memorial Prize in Economic Sciences on Wednesday for their use of statistical methods for studying the timing behind economic developments.

Their research is used to gather data for "time series," such as chronological observations or for estimating relationships and testing hypotheses in economic theory, the Royal Swedish Academy of Sciences said.

"Such time series show the development of gross domestic product, prices, interest rates, stock prices, etc.," the citation said.

Their findings are important because on financial markets, random fluctuations and volatility can affect share prices and value, along with other financial instruments.

Engle is on the faculty of New York University and Granger retired June 30 from the University of California, San Diego, where Engle had previously worked. They will share the prize worth 10 million kronor -- about $1.3 million.

Engle told The Associated Press he was surprised by the award, but grateful.

"It's the treat of a lifetime," he said from Annecy, France, where he is on sabbatical. "I'm getting e-mails and messages from friends all over the world."

He said is work is a statistical approach to measuring volatility.

"That's why it's so interesting in financial applications because volatility is such a fundamental concept," he said. "It's important for measuring risk, for valuing derivatives and other financial instruments."

Granger is on sabbatical in New Zealand and was not immediately available for comment.

Engle is the fourth consecutive American to receive the award since 2000.

Peter Englund, a banking and insurance professor at the Stockholm Institute for Financial Research, said their research has helped experts estimate volatility.

"This has most of its applications in financial markets, for instance how the volatility of stock returns and investment returns in general vary over time," he said. "Granger has developed methods that help us model variables that follow trends over time and in particular to estimate relationships between such variables. One example would be exchange rates and relative price levels."

The Nobel Memorial Prize for Economic Sciences is the only award not established in the will of Swedish industrialist Alfred Nobel, the inventor of dynamite. It was established separately in 1968 by the Swedish central bank, but it is grouped with the other awards.

Past awards have recognized research on topics ranging from poverty and famine to how multinational corporations reap profits, and theories on how people choose jobs and the welfare losses caused by environmental catastrophes.

Two Americans -- Daniel Kahneman, 68, a U.S. and Israeli citizen based at Princeton University and Vernon L. Smith, 75, of George Mason University -- won last year's prize for pioneering the use of psychological and experimental economics in decision-making to make markets safer.

The medicine, physics, chemistry, literature and peace prizes were first awarded in 1901.

The announcements of this year's Nobel awards started last week with the literature prize going to J.M. Coetzee of South Africa.

On Monday, American Paul C. Lauterbur, and Briton Sir Peter Mansfield were selected for the 2003 Nobel Prize in physiology or medicine for discoveries leading to MRI, which reveals images of the body's inner organs.

Tuesday's physics prize went to Alexei A. Abrikosov, Anthony J. Leggett, and Vitaly L. Ginzburg, for their work concerning two phenomena called superconductivity and superfluidity.

Earlier Wednesday, Americans Peter Agre and Roderick MacKinnon won the Nobel Prize in chemistry for studies of tiny transportation tunnels in cell walls, work that illuminates diseases of the heart, kidneys and nervous system.

The Nobel Peace Prize was to be announced Friday in Oslo, Norway.

The prizes are presented to the winners on Dec. 10, the anniversary of Nobel's death in 1896.

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