Miller, Merton Howard

▪ 2001

      American economist (b. May 16, 1923, Boston, Mass.—d. June 3, 2000, Chicago, Ill.), pioneered the field of capital asset theory; along with Harry M. Markowitz and William F. Sharpe, Miller was awarded the Nobel Prize for Economics in 1990. Educated at Harvard University (B.A., 1944) and Johns Hopkins University, Baltimore, Md. (Ph.D., 1952), Miller taught at the Carnegie Institute of Technology (now Carnegie Mellon University), Pittsburgh, Pa., until 1961. He was a professor of finance at the University of Chicago's Graduate School of Business Administration from 1961 to 1993. Miller's work was based on the work of Markowitz (whose portfolio theory established that wealth can best be invested in assets that vary in terms of risk and expected return) and Sharpe (who developed the capital asset pricing model to explain how securities prices reflect risks and potential returns). With his colleague Franco Modigliani, who received the Nobel Prize for Economics in 1985, Miller created the Modigliani-Miller theorem to explain the relationship between a company's capital asset structure and dividend policy and its market value and cost of capital. The theorem demonstrated that how a company funds its activities is less important than the profitability of those activities. Miller was recognized as one of the most important developers of theoretical and empirical analysis in the field of corporate finance. He was also noted for his work as a director of the Chicago Mercantile Exchange and the Chicago Board of Trade.

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