Helping to hedge risks in financial markets and predict the future

Professor Robert Engle, of New York University, and Professor Clive Granger, a British citizen born in Swansea, Wales, who taught at University of California at San Diego, will share the 2003 Nobel Prize in Economics.

The two men will split a prize worth about $1.3m (�745,000).

It is the third Nobel Prize awarded to a UK citizen this year.

Measuring the economy

The Nobel committee praised Engle and Granger's "indispensible" work, which it said played a key role in explaining how to interpret economic data.

Robert Engle: analysing risky stock market investments

The pair's work is used increasingly by governments and companies to help avoid damaging cycles of boom and bust - and hedge risky investments like shares.

Dr Engle's work explains how random fluctuations in the value of financial markets can be smoothed out, allowing the risk of holding shares to be calculated.

"His models have become indispensable tools not only for researchers but also for analysts on financial markets, who use them in asset pricing and in evaluating portfolio risk," the Swedish Academy of Sciences said.

Professor Engle, who was born in Syracuse, New York, originally trained as a physicist before receiving his PhD in economics from Cornell University.

Dr Granger looked at statistics covering longer periods of time.

He examined the relationship between key economic variables like prices and the exchange rate, or wealth and consumption.

Clive Granger: the key to forecasting is statistics

His work helped to explain long-term trends, by reducing the effect of statistical fluctuations.

It allows economists to build better models which forecast the future path of the economy.

Dr Granger received his PhD in statistics from Nottingham University.

Torsten Persson, chairman of the Economy Prize committee, said Granger's research "has completely transformed statistical models with economic time series."

Technical economics

The Nobel award, officially called the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, is given annually by the Royal Swedish Academy of Sciences.

This year's award is a return to the long-term trend of awarding the prize for key work in macroeconomics and statistical forecasting.

In the past few years, the prize has been given to a more eclectic group of economists, including a prominent critic of the IMF, two psychologists, game theorists, and a development economist.

More than two-thirds of Nobel Economics Prizes, which was only introduced in 1969, have gone to Americans.

The winners will travel to Stockholm on 10 December to receive the award, the anniversary of Alfred Nobel's death.