World Class Faculty & Research / April 1, 2005

Statistics Day Features Nobel Prize Winner Robert F. Engle III

Robert F. Engle III, co-recipient of the 2003 Nobel Prize in Economic Sciences with Clive W. Granger, spoke at the Smith School on Friday, April 15 as part of the University of Maryland Statistics Consortiums Statistics Day 2005 program. Engle is the Michael Armellino Professor of Management of Financial Services at the Stern School of Business, New York University. He was honored for his work in developing methods for statistical modeling of time-varying volatility. In addition to being a Nobel laureate, Engle is also a former lacrosse player and avid fan, as well as an accomplished figure skater who competed in the 1997 Adult Ice Dance competition in Lake Placid, New York.

For baby boomers interested in managing their retirement funds, the issue of how to manage stock market volatility is of immediate and pressing interest. Financial planners often use one of the many variations of Engle's ARCH (auto-regressive conditional heteroskedasticity) models, which describe uncertainty in the financial world, to manage portfolio holdings. The models helped launch the discipline combining economics, statistics and high-level math, known as econometrics. They accurately capture the properties of many time series and are indispensable tools for researchers and for financial analysts, who use them in asset pricing and in evaluating portfolio risk.

ARCH models have received a great deal of attention since Engle and Granger received the Nobel prize in 2003, and Engle has found himself spending time answering questions from financial reporters about his work. The press has a hard time with the concept of heteroskedasticity, Engle said. Reporters will ask me to break the ideas involved down into the simplest terms, so I do: When volatility is low, it is probably going to remain low; when volatility is high, it will probably remain high for a while before it comes down again. And then the reporter looks at me and says You won the Nobel Prize for that?

Though ARCH models may only be well known and understood by a small segment of the population, they are widely used and have spawned an entire field of research dedicated to exploring their permutations.

We began Statistics Day to recognize the accomplishments of individuals who have made contributions to the theory and study of statistics, says Francis Alt, associate professor of decision and information technologies. We were very pleased to have Dr. Engle joining us this year. His work is very relevant to portfolio managers, mutual fund managers, and others in the field of finance.

Engle's lecture was followed by brief remarks from two discussants. Discussant A. Ronald Gallant, Hanes Corporation Foundation Professor of Business Administration in Economics at Fuqua School of Business, Duke University, followed Engle's lecture. Gallant presented a wide overview of models and theories dealing with consumption-based asset pricing, noting where further statistical analysis is needed. Discussant Sastry G. Pantula, professor, department head and director of the Institute of Statistics at North Carolina State University, briefly considered the history of ARCH models and their effect on the study of econometrics.

Statistics Day is sponsored by the University of Maryland Statistics Consortium, an informal collaboration of various units on campus that teach statistical methods and theory, including the Smith School, the education department, the statistics program in the math department, and the economics department.

The University of Maryland's Statistics Consortium, which brings together programs and resources relating to statistical theory from across the university community. 

Rebecca Winner, Senior Writer & Editor, Office of Marketing & Communications [4/18/05]

Media Contact

Greg Muraski
Media Relations Manager
301-405-5283  
301-892-0973 Mobile
gmuraski@umd.edu 

About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Back to Top