ECONOMY

MIT’s Stephen Ross wins Deutsche Bank economic prize

Stephen A. Ross was named winner of the €50,000 ($56,393) Deutsche Bank Prize in Financial Economics for 2015.

Mr. Ross is the Franco Modigliani professor of financial economics and a professor of finance at the Sloan School of Management, Massachusetts Institute of Technology.

“Stephen Ross’ seminal paper on arbitrage pricing theory is the foundation for all the risk factor models we use today,” Jurgen Fitschen, co-CEO, Deutsche Bank, said in a statement about the award, adding Mr. Ross helped develop “the risk-neutral pricing theory that underpins the entire options market.”

Deutsche Bank plans to award the prize Sept. 24 at an academic symposium of the Center for Financial Studies in Frankfurt. Mr. Ross said in an interview he is honored to receive the recognition and plans to attend the award ceremony.

The center, an independent research institution housed at Goethe University, Frankfurt, awards the prize to recognize “internationally renowned researchers whose work has significantly influenced financial economics and led to fundamental advances in economic theory and practice,” according to a statement from Deutsche Bank AG announcing the winner.

Mr. Ross said he plans to give the money to charity.

“It’s an encouraging pat on the back,” Mr. Ross said of the award. “It’s given by people who are very knowledgeable. If they weren’t on the panel, any one of them would have been a candidate for the award.”

Michael Haliassos is a member of the panel of judges that selected Mr. Ross, and is chairman for macroeconomics and finance at Goethe, and is a director of the center. Mr. Haliassos said in the statement that Mr. Ross’ “current research on recovery theory will have implications not only for the study of the entire market subjective probability distribution, but also for household finance.” Recovery theory is a method to determine the predictive content of market prices and risks.

The prize is funded by the Deutsche Bank Donation Fund in the Donor's Association for German Science, based in Frankfurt and founded and supported by Deutsche Bank to promote economic research and education.

The prize has been given every two years since the first award in 2005 to Eugene F. Fama, the Robert R. McCormick distinguished service professor of finance, University of Chicago Booth School of Business.

The panel of judges included Robert C. Merton, 1997 Nobel laureate in economics and School of Management distinguished professor of finance at the MIT Sloan school, and was chaired by Jan P. Krahnen, a director of the center and the Sustainable Architecture in Finance for Europe research center as well as professor in corporate finance at Goethe University, Frankfurt.

Other members of the panel were Guillermo Calvo, professor of economics, international and public affairs, Columbia University; David Folkerts-Landau, chief economist, Deutsche Bank; Otmar Issing, president of the center; Nobuhiro Kiyotaki, professor of economics, Princeton University; Holger Kraft, professor of finance and the UBS Endowed Chair of Asset Pricing, Goethe; René M. Stulz, the Everett D. Reese chair of banking and monetary economics and director of the Charles A. Dice Center for Research in Financial Economics, Fisher College of Business, Ohio Sate University; Uwe Walz, professor of management and microeconomics, Goethe, and a director of the center; and Mirko Wiederholt, professor and chair of microeconomics, Goethe.