Finance Professor Ulrike Malmendier Receives 2013 Fischer Black Prize

Berkeley-Haas Finance Professor Ulrike Malmendier has been awarded the 2013 Fischer Black Prize from the American Finance Association, which honors the top finance scholar under the age of 40 years old.  The prize was announced to the public Jan. 7, 2013.

The prize was established in 2002 in honor of Fischer Black, who was a co-inventor, along with Myron Scholes, of the Nobel-prize winning Black-Scholes-Merton Options-Pricing Model. The prize is modeled after the Fields Medal in mathematics and the Clark Medal in economics.

Prof. Ulrike Malmendier
Prof. Ulrike Malmendier

Malmendier is the fifth recipient of the biennial prize. (No prize was awarded in 2005, when no candidate met the standards.) She holds a joint position as a professor of economics at UC Berkeley, which she joined in 2006, and has been at Haas since 2010.

“I’m thrilled and honored that the American Finance Association selected me for the award from a very select group of people,” says Malmendier.  “I can’t fully believe that this has actually happened yet.”

The American Finance Association’s award citation referred to Malmendier’s work in corporate finance, behavioral economics and finance, contract theory, and the history of the firm, particularly noting the originality and creativity of Malmendier’s research.

“The Fischer Black Prize is one of the most prestigious academic prizes—this is a great honor for an outstanding scholar,” says Berkeley-Haas Dean Rich Lyons. “We are delighted that the finance profession has recognized Malmendier’s accomplishments, and we’re proud that she’s a member of Berkeley-Haas.”

Malmendier feels particularly thankful for the recognition since her area of research, the intersection between economics and finance or behavioral corporate finance, is less mainstream.  Malmendier says, “I have always been interested in both economics and finance and in particular, why and how individuals make decisions—specifically how individuals make mistakes and systematically biased decisions. Some applications are in finance, but often my research questions are far from mainstream finance.”

One of Malmendier’s recent research papers, “Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?” published in the Quarterly Journal of Economics in 2011 with co-author Stefan Nagel of Stanford, is representative of the originality and creativity of  her research. The paper shows that groups of people who have experienced macro-economic shocks such as low market returns, for example, tend to take less risk later in their lives, and vice versa.

“Malmendier’s results have been observed anecdotally, but she was able to show them econometrically, which is not easy to do,” says Haas Finance Professor Terry Odean, who holds the Rudd Family Foundation Chair and chairs the Finance Group at Berkeley-Haas.

Another research paper, “Paying Not to Go to the Gym,” published in the American Economic Review in 2006 and co-authored with Berkeley Economics Professor Stefano DellaVigna, shows that people with monthly gym memberships tend to use their membership far too infrequently to justify the monthly dues – paying per visit would be much cheaper. Regardless, they tend to stay enrolled rather than cancelling it. Odean says, “For a gym member to actually end their membership is to admit that they won’t exercise—that they give up.  From an economist point of view, this is interesting because it is expensive to maintain this membership and to get no value out of the membership.”

Andrew Rose, associate dean and faculty chair at Berkeley-Haas and professor of economic analysis and policy, is proud of Malmendier and the school’s entire finance faculty who have recently won numerous awards, “In addition to Ulrike Malmendier’s Fischer Black Prize, Professor Adair Morse has recently won the Brattle Prize for the best corporate finance paper published in the Journal of Finance, and Professor Nicolae Gârleanu has recently won the Smith Breeden Prize for the best finance research paper in the Journal of Finance in any area other than corporate finance.  We have much to celebrate with our outstanding finance faculty.”