The American economist Robert F. Engle won the Nobel Prize in 2003 for methods of analyzing economic time series with time-varying volatility. At the Accounting Summer School, organized by Prof. Lucie Courteau and Prof. Massimiliano Bonacchi, he gave an impromptu short lecture.
Prof. Engle, you started by studying physics and then did your PhD in Economics – how useful is it for students to combine different studies for their careers?
Robert F. Engle: I think more and more students are actually doing a lot of mathematics and science before they do economics. I think it is easier this way. I had expected that some of my physics ideas would be more useful in terms of models or mathematical concepts, but they were not. What they were useful for concerned how you can think about science. Whenever I’m faced with a dilemma, I ask myself what are the data telling us, what is the science in this? Are we forcing the issue or are the data really telling us this? This is the way a scientist thinks about the world, and I think it’s a good way to think about economics, too.
You said in your introduction to the Accounting Summer School that all research should be about rigor and relevance. How would you explain the methods that won you the Nobel Prize?
What I developed was a statistical approach to measuring risk, which is particularly useful in financial markets. And that’s how it is used.
You are now teaching at New York University, Stern School of Business and you started the V-Lab. Would you say that you dedicate your life to the volatility concept?
(laughs) It is probably the center of my research. But when you think about the financial crisis, you say ok, this is not just volatility, this is risk that is in the financial sector. And how is the financial sector risk related to the economy as a whole? So there is a whole area called macrofinance which tries to make the connection. Another kind of risk that I’m now focused on is climate change risk. How can we protect ourselves and how can we measure those long-run risks? Just because risks are in the distant future doesn’t mean they are less important.
So you view how the climate is changing in a different way to other people in your country?
There are different ways people choose to describe their refusal to do anything about it. They dispute not so much the fact that the climate is changing but that you can do anything about it. Mabe they will do something about it when the water rises too high and they’ll have to move NYC someplace else.
When you come to regions like South Tyrol, do you see or value prosperity, do you have this economic eye while travelling?
I do actually. I often ask people “how are things here”? I am very worried about Italy, but I don’t get the impression it’s so bad here in Bolzano. I don’t have any statistics about this region, but I see a lot of construction.
How did you and your wife first get to know South Tyrol?
We have come to Bolzano many times. We came for the first time in the early 70s to go walking in the Catinaccio, we went to some rifugi, and we loved it so much that we came back to do the Tre Cime.- We’ve also comeback to do the Sella group and to lots of other places. May wife said that before she had children she wanted to do the via Ferrata of Brenta, which we did. We went home, had our babies and then we brought our children here for holidays when they were small and now they come back on their own.
In the main picture from left: the professors Paolo Perego, Amedeo Pugliese (Università di Padova), Lucie Courteau, Nobel Prize winner Robert F. Engle, Rector Paolo Lugli and Massimiliano Bonacchi.
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