John H. Cochrane
Encyclopedia
John Howland Cochrane is an economist
, specializing in financial economics
and macroeconomics
. He is the AQR Capital Management Professor of Finance at the University of Chicago Booth School of Business.
(1984–1985). He was hired by the University of Chicago
economics department in 1986 and moved to the business school in 1993.
Cochrane has served as head of the National Bureau of Economic Research
asset pricing group, and was the editor of the Journal of Political Economy
from 1998 to 2003. He was elected Fellow of the Econometric Society
in 2001, served as vice-president of the American Finance Association
in 2008, and was elected president of this learned society
for the 2010 term.
- how, given the observed prices and financial returns, households and firms decide on consumption, investment, and financing ;
- how, in equilibrium, prices and financial returns are determined by households and firms decisions.
This is a standard general equilibrium logic, but many financial economists do not view this as a priority and prefer to explain prices without an ultimate reference to choices of households and firms. Similarly, many macroeconomists choose not to worry about asset prices.
In this vein, Cochrane's work has been to document some empirical patterns and offer some potential explanations. His 1999 J.P.E. article with John Y. Campbell
develops a representative agent model with nonlinear habits which matches the high and volatile risk premium on stocks, the predictability of stock returns, etc. In several articles (1991 J.F., 1996 J.P.E.) he develops and tests a "production-based asset pricing model" based on the q-theory of investment
.
In two 1992 articles, Cochrane emphasized some features of asset prices which are difficult to account for, such as the predictability of equity returns, and the long-run equity premium.
His more recent work with Monika Piazzesi studies bond markets. In particular, in a number of papers, Cochrane and Piazzesi study the predictability of bond returns.
criticized repeatedly his viewpoint on his blog and in a New York Times Magazine article, leading John Cochrane to respond on his website.
. They have four children and live in Hyde Park.
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
, specializing in financial economics
Financial economics
Financial Economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment"....
and macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...
. He is the AQR Capital Management Professor of Finance at the University of Chicago Booth School of Business.
Career
Cochrane received his Ph.D. in Economics from the University of California at Berkeley in 1986, after having obtained a B.S. in Physics from MIT in 1979 and having served as a junior economist on the Council of Economic AdvisersCouncil of Economic Advisers
The Council of Economic Advisers is an agency within the Executive Office of the President that advises the President of the United States on economic policy...
(1984–1985). He was hired by the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
economics department in 1986 and moved to the business school in 1993.
Cochrane has served as head of the National Bureau of Economic Research
National Bureau of Economic Research
The National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...
asset pricing group, and was the editor of the Journal of Political Economy
Journal of Political Economy
The Journal of Political Economy is an academic journal run by economists at the University of Chicago and published every two months by the University of Chicago Press. The journal publishes articles in both theoretical economics and empirical economics...
from 1998 to 2003. He was elected Fellow of the Econometric Society
Econometric Society
The Econometric Society is an international society for the advancement of economic theory in its relation with statistics and mathematics. It was founded on December 29, 1930 at the Stalton Hotel in Cleveland, Ohio....
in 2001, served as vice-president of the American Finance Association
American Finance Association
The American Finance Association is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939...
in 2008, and was elected president of this learned society
Learned society
A learned society is an organization that exists to promote an academic discipline/profession, as well a group of disciplines. Membership may be open to all, may require possession of some qualification, or may be an honor conferred by election, as is the case with the oldest learned societies,...
for the 2010 term.
Main contributions
The central idea of Cochrane's research is that macroeconomics and finance should be linked: a comprehensive theory needs to explain both:- how, given the observed prices and financial returns, households and firms decide on consumption, investment, and financing ;
- how, in equilibrium, prices and financial returns are determined by households and firms decisions.
This is a standard general equilibrium logic, but many financial economists do not view this as a priority and prefer to explain prices without an ultimate reference to choices of households and firms. Similarly, many macroeconomists choose not to worry about asset prices.
In this vein, Cochrane's work has been to document some empirical patterns and offer some potential explanations. His 1999 J.P.E. article with John Y. Campbell
John Y. Campbell
John Young Campbell is a British-American economist. He is a professor and Chairman of the Economics department at Harvard University.- Early years :...
develops a representative agent model with nonlinear habits which matches the high and volatile risk premium on stocks, the predictability of stock returns, etc. In several articles (1991 J.F., 1996 J.P.E.) he develops and tests a "production-based asset pricing model" based on the q-theory of investment
Tobin's q
Tobin's q was developed by James Tobin as the ratio between the market value and replacement value of the same physical asset:One, the numerator, is the market valuation: the going price in the market for exchanging existing assets. The other, the denominator, is the replacement or reproduction...
.
In two 1992 articles, Cochrane emphasized some features of asset prices which are difficult to account for, such as the predictability of equity returns, and the long-run equity premium.
His more recent work with Monika Piazzesi studies bond markets. In particular, in a number of papers, Cochrane and Piazzesi study the predictability of bond returns.
Other contributions
Cochrane has also worked on the fiscal theory of the price level, on the debate between permanent and temporary shocks in macroeconomic fluctuations, and the cost of near-rational behavior.Asset Pricing book
Cochrane is the author of Asset Pricing, a widely used textbook in graduate courses on asset pricing. According to his own words, the organizing principle of the book is that everything can be traced back to specializations of a single equation: the basic pricing equation. Cochrane received the TIAA-CREF Institute Paul A. Samuelson Award for this book.Media appearances
Since 2008, John Cochrane has appeared more extensively in the media as he contributed to the debate on the financial crisis. Paul KrugmanPaul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
criticized repeatedly his viewpoint on his blog and in a New York Times Magazine article, leading John Cochrane to respond on his website.
Personal life
Cochrane's father was a historian at the University of Chicago. Cochrane is married to Elizabeth Fama, a children's book author and the daughter of noted financial economist Eugene FamaEugene Fama
Eugene Francis "Gene" Fama is an American economist, known for his work on portfolio theory and asset pricing, both theoretical and empirical. He is currently Robert R...
. They have four children and live in Hyde Park.
External links
- John Cochrane's home page at the University of ChicagoUniversity of ChicagoThe University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
- Publications at the National Bureau of Economic ResearchNational Bureau of Economic ResearchThe National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...