DEFINITION of Robert F. Engle III
Robert F. Engle III is an American economist who won the 2003 Nobel Prize in Economics, along with Clive W.J. Granger, for analysis of time-series data with time-varying volatility. Time-varying volatility is the fluctuation over time of the value of financial instruments, and Engle's discoveries of the variations in these instruments' volatility levels have become crucial tools for researchers and financial analysts. The model he developed is called autoregressive conditional heteroskedasticity, or ARCH.
BREAKING DOWN Robert F. Engle III
Robert F. Engle III was born in 1942 in New York and earned his Ph.D. in Economics from Cornell University. He has taught at the Massachusetts Institute of Technology, the University of California at San Diego and New York University. Originally, Dr. Engle's academic pursuit was physics (along with his doctorate degree in Economics, he earned a Master's Degree in Physics at Cornell), but his "love" for economics led him to a career of research and teaching in the field. He credits Ta Chung Liu, his former advisor at Cornell, for grounding him in Econometrics as well as sparking an intellectual interest in analyzing relationships between different time scales for economic modeling. Here, Engle writes in his autobiography posted on the official Nobel Prize website, "I was able to use some of my physics skills by formulating the problem in the frequency domain and applying Clive Granger's 'typical spectral shape' for an economic time series."
The Nobel Committee awarded the prize to Dr. Engle, stating that "his method (ARCH) could, in particular, clarify market developments where turbulent periods, with large fluctuations, are followed by calmer periods, with modest fluctuations." A fun fact about the man: Engle started a hobby of ice skating while in cold upstate New York and developed this passion to high skill levels, participating in numerous national adult skating competitions. He and his partners placed 2nd in ice dancing in 1996 and 1999.