Larry G. Epstein

Professor of Economics. Much of his work focused on decision theory, developing formal, mathematical models of human decision-making for use in understanding human behavior. He analyzes empirical observations that are difficult to explain with standard models, identifies why these models fail, provides an improved model, and explains how the new model improves prediction and understanding of markets. His 1989 Econometrica paper showed that standard models do not adequately explain covariance between asset returns and consumption growth. He then developed new tools and went on in a 1991 Journal of Political Economy paper to work out a reformulation that has since been widely adopted. Epstein pioneered the study of ambiguity aversion's impact on asset pricing in Econometrica papers of 1994 and 2002 and has published key methodological papers on ambiguity aversion and other topics in Review of Economic Studies and Journal of Economic Theory.