Press Release Announcing the Third Ross Prize

Foundation for the Advancement of Research in Financial Economics Awards Third $100,000 Academic Prize

Economics Scholars Bengt Holmstrom and Jean Tirole Recognized

December 13, 2012.

Stanford, CA --- The Foundation for the Advancement of Research in Financial Economics is happy to announce that the third Ross prize has been awarded to “Private and Public Supply of Liquidity,” published in the Journal of Political Economy in 1998, by Bengt Holmstrom from MIT and Jean Tirole from the Toulouse School of Economics.

The winning article has made two fundamental contributions to our understanding of liquidity needs and liquidity provision in a market economy. First, it developed a framework for analyzing the need of firms to have access to liquidity in order to meet uncertain payment obligations. Second, the paper has shown that private institutions, markets or intermediaries, may be unable to provide for these needs in an efficient manner, in which case government intervention can improve on market outcomes. "This is a landmark paper that shows how informational frictions can limit funding liquidity in a general equilibrium setting," said Markus Brunnermeier from Princeton.

The prize committee was chaired by Jiang Wang and included also Andrea Eisfeldt, David Modest, Paul Pfleiderer, Dimitri Vayanos, and Amir Yaron. Their hard work is greatly appreciated.

The fourth FARFE conference will be held on October 18–20, 2013 where participants can celebrate the prize and discuss related and other issues. The conference will have the same format and location as previous conferences, at Endicott house, with most events taking place through the day Saturday, October 19.

Thanks again to the prize committee, congratulations to Bengt and Jean.

Founded in 2006 by finance academics and practitioners, FARFE is committed to supporting research in financial economics and to facilitating productive interaction between research and practice in finance. For more details about FARFE, the Ross Prize, and the award-winning paper, see


Holmstrom and Tirole's Paper

Citation for Third Ross Prize

Past Winners

2010 Prize: To "Credit Cycles," by Nobuhiro Kiyotaki and John Moore.

2008 Prize: To "Corporate Debt Value, Bond Covenants, and Optimal Capital Structure," by Hayne Leland.

The Stephen A. Ross Prize in Financial Economics

The initiative to establish FARFE came from academics and practitioners who were former students of Stephen A. Ross. To encourage research that exemplifies his focus on fundamental research, and to celebrate the influence he has had on financial economics and on the lives of his students, FARFE has established the Stephen A. Ross Prize in Financial Economics. This biennial award of $100,000 honors a paper in financial economics selected from all papers published over the prior 15 years in any finance or economics outlet. The winning paper must either develop or test a theory in financial economics. The inaugural prize was awarded in 2008 to Hayne Leland for his 1994 Journal of Finance paper "Corporate Debt Value, Bond Covenants, and Optimal Capital Structure."   About Stephen A. Ross
History of the Stephen A. Ross Prize