Albert “Pete” Kyle, the Charles E. Smith Chair Professor of Finance at the University of Maryland’s Robert H. Smith School of Business, has been named 2018 recipient of the prestigious CME Group-MSRI Prize in Innovative Quantitative Applications for his landmark contributions to the theory of economics and market structure.
His seminal 1985 paper, nicknamed Kyle 85 by Nobel laureates and others, changed the thinking in academia on the way markets operate. Previously, scholars taught that pure market forces, not the influence of any individuals, controlled prices. But Kyle, who grew up around the cotton trade in Tennessee with his father and grandfather both cotton merchants, saw firsthand the influence traders have on prices. “If you buy, you push prices up,” Kyle says. “If you sell, you push prices down.”
“My contribution was to say the price was not magic,” Kyle says. “It was the outcome of a game — like a game of Monopoly — except it’s a game of people submitting orders and moving the price around. And we should think of it as an industrial organization problem that can be addressed using game theory.”
Kyle also had major influence on the advent of digital trading. He worked with federal regulators to modernize Nasdaq transactions and level the playing field with electronic access for large institutional traders and the masses to make prices more competitive.
The CME Group-MSRI Prize in Innovative Quantitative Applications was established in 2006 by the CME Group, operator of the top futures and options exchanges, and the Mathematical Sciences Research Institute (MSRI). The award recognizes an individual or a group for originality and innovation in the use of mathematical, statistical or computational methods for the study of the behavior of markets, and more broadly of global economics.
Kyle will receive the prize at a luncheon and award ceremony celebrating his accomplishments on April 8 in Chicago. The event will also include a panel discussion on Equity Market Design in the 21st Century and a presentation from Kyle on his research.
Past CME Group-MSRI Prize winners have included distinguished luminaries in economics and mathematics. Five out of 12 of these honorees have gone on to receive the Nobel Prize in Economic Sciences. A complete list of past recipients is available here.
Read more about Kyle’s research, contributions and background.