Wednesday, February 5, 2003
Finance Expert Stephen Ross Presents Nash Lecture at Carnegie Mellon University on March 18
PITTSBURGH—Stephen Ross, renowned financial expert and inventor of the arbitrage pricing theory, will present "Behavioral Finance," the second Nash Distinguished Lecture at 4:30 p.m., Tuesday, March 18, 2003, in the McConomy Auditorium, University Center, Carnegie Mellon University. The lecture is free and open to the public.
Behavioral finance attempts to explain by psychological factors phenomena in the financial market that cannot be explained by models of rational choice. Ross counters behavioral finance by suggesting that aberrant market behavior is, in fact, readily understood when subjected to a detailed analysis that takes into account all the phenomena causing changes in financial markets.
Ross is the Franco Modigliani Professor of Finance and Economics at MIT. In the arbitrage pricing theory, Ross has worked out the consequences of no-arbitrage, going beyond "beta," the sensitivity of stock prices to movements in the broad market, to include other factors affecting returns. Ross is one of the creators of risk-neutral pricing, a concept that revolutionized financial markets. Risk-neutral pricing carries the Nobel prize-winning ideas of Black, Scholes and Merton to their logical conclusion and shows how to price a host of derivative securities. Additionally, Ross developed the binomial asset pricing model, which provides the simplest mathematical setting in which risk-neutral pricing can be developed.
"Steve Ross is a recognized innovator in the field of finance, and we are very fortunate that he could address Carnegie Mellon and the Pittsburgh community," said David Heath, Orion Hoch Professor of Mathematical Sciences and a member of Carnegie Mellon's interdisciplinary Center for Computational Finance, which hosts the Nash Lecture.
Ross has put his ideas into practice through Roll and Ross Asset Management Company. Recently, Ross has been studying the causes of financial disasters. His paper, "Forensic Finance," examines evidence that surfaces after these events to better understand why financial disasters occur.
The Nash lecture is named after John F. Nash Jr., who earned his bachelor's and master's degrees in mathematics in 1948 from Carnegie Institute of Technology and his doctor's degree from Princeton in 1950. In 1994 Nash, along with John Harsanyi and Reinhard Selten, received the Alfred Nobel Memorial Prize in Economic Sciences for his pioneering analysis of equilibria in the theory of non-cooperative games. This work, sometimes called the Nash equilibrium, has greatly influenced research in economics and finance.
By: Lauren Ward