Robert F. Engle III

Who Is Robert F. Engle III?

Robert F. Engle III is an econometrician and teacher of economics at New York University. Engle won the 2003 Nobel Prize in Economics, alongside Clive W.J. Granger, for their analysis of time-series data with time-varying volatility.

Time-varying volatility is the vacillation over the long haul of the value of financial instruments, and Engle's disclosures of the varieties in these instruments' volatility levels have become vital apparatuses for researchers and financial analysts. The model he developed is called autoregressive conditional heteroskedasticity (ARCH).

Grasping Robert F. Engle III

Robert F. Engle III was brought into the world in 1942 in New York and earned his Ph.D. in economics from Cornell University. He has educated at the Massachusetts Institute of Technology, the University of California at San Diego, and New York University.

Initially, Dr. Engle's scholastic interest was physical science (alongside his doctorate degree in economics, he likewise earned a graduate degree in physical science at Cornell), yet his love for economics drove him to a career of research and showing in the field. He credits Ta Chung Liu, his former advisor at Cornell, for establishing him in econometrics as well as igniting an intellectual interest in breaking down relationships between various time scales for economic modeling.

A pleasant reality about the man: Engle began ice skating as a hobby while in cold upstate New York and developed this enthusiasm to high expertise levels, participating in various national grown-up skating contests. He and his partners set second in ice moving in 1996 and 1999.

Major Contributions

Engle is best known for his development of ARCH, for which he was granted the Nobel. He has likewise accomplished significant work in econometric modeling for urban economics. Along with Clive Granger, he assisted with fostering a time-series econometric modeling of and tests for cointegration between series. He later extended these econometric procedures to help found the field of financial econometrics.

Urban Economics

Engle's initial work was in urban economics at MIT, where he was part of a team that developed an intricate econometric model of the Boston region economy. He distributed several articles about applying econometric modeling to urban economics to support urban planning and redevelopment with objective statistical instruments, which was an original approach at that point.

ARCH

Engle developed ARCH to model time-varying volatility in inflation, prices, and wages to test a theory of Milton Friedman's, which is that economic cycles could be made sense of in view of changes over the long run in individuals' vulnerability about inflation. In ARCH modeling, the variance of the blunder term is modeled as its very own function past values; assuming tests of this model show a huge relationship between the variance and its past values, then, at that point, this demonstrates that the data being referred to display a few time periods of raised volatility and different periods of relative quiet.

The Nobel Committee granted the prize to Dr. Engle, expressing that "his method (ARCH) could, in particular, explain market developments where fierce periods, with large vacillations, are trailed by more quiet periods, with unobtrusive changes."

Cointegration

While at UCSD with associate Clive Granger, Engle assisted with creating modeling procedures and tests for cointegration. In cointegration, two or additional time series show a relationship through time fairly like the correlation between cross-sectional factors. Cointegration analysis is one device that can be utilized to help recognize factors that have a spurious correlation and those that have a conceivable causal relationship.

Financial Econometrics

Engle and others would proceed to broaden these time-series econometric methods, alongside others, to help found another approach to financial estimates, planning, and risk management, which became known as financial econometrics and quantitative finance. He was prime supporter, alongside Eric Ghysels, of the Society for Financial Econometrics.

Instruments, for example, the capital asset pricing model, the value at risk model, and modern portfolio theory the entire fall under this overall area. Quite a bit of modern quantitative finance owes its beginnings to the instruments that Engle and other financial econometricians have developed.

Highlights

• Robert Engle is an econometrician and teacher of economics at New York University who shared the 2003 Nobel Prize in Economics.
• His work on ARCH, cointegration analysis, and other time-series econometric methods helped found the field of financial econometrics, which forms the basis of a lot of modern quantitative financial practice.
• Engle is best known for his development of autoregressive conditional heteroskedasticity (ARCH) modeling and testing.