Foundation for the Advancement of
Research in Financial Economics
The Mission of FARFE
FARFE, the Foundation for the Advancement of Research in Financial Economics, was created to support and nurture conceptual research in financial economics, one of the most influential areas in the social sciences. Across a spectrum that includes portfolio theory, investments, corporate finance, asset pricing, trading mechanisms and the theory of derivatives, financial economics has developed into a science, with ongoing interaction between empirical observation and theoretical analysis. Like many natural sciences, it has bred a new field of engineering. Techniques developed by financial economists are used by practitioners to construct and value new securities, to control risk, and to innovate in financial markets. Research that incorporates market imperfections and various frictions stemming from incentive issues and conflicts of interest, transaction costs and differences in information, has helped identify some of the challenges associated with a complex and interconnected financial system.
Theoretical advances in financial economics in the last 50 years have played a crucial role in the development of the financial industry. Fundamental research in this area is and will continue to be critical in producing insights and techniques that advance our understanding of this important part of the economy. FARFE aspires to be a premier institution that supports this research and promotes interaction between researchers and practitioners, with a view to enhancing research and practice, improving the functioning of the financial markets, and informing policy debate.
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 conceptual 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 main input to conceptual research in finance is a researcher's time. To allow more time for research, FARFE plans to award FARFE Fellowships to scholars on a competitive basis to free them for a period of time to pursue their research in financial economics.
FARFE also intends to organize and sponsor conferences that will bring together scholars and practitioners. The exchange of ideas at the founding conference revealed the shared passion felt by both practitioners and academics for fundamental work in finance, and it was widely felt that future conferences would be a catalyst for breakthrough research.
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