"I did know this was the day they announced the prize," Diamond said. "I thought it was probably legit, but you never know. I have friends with a good sense of humor."
WATCH | UChicago applauds professor who won Nobel Prize
University of Chicago applauds professor who won Nobel Prize
Diamond shares the prize with former Federal Reserve chair Ben Bernanke and Phil Dybvig of Washington University in St. Louis.
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The three economists won for a body of work that stretches back into the early 1980s. Their research delved into how bank failures worsen and extend financial disasters, and how the system might be made safer in light of those risks.
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"A well-structured financial system is very vulnerable to the fear of fear itself, a self-fulfilling prophecy that it might go down," Diamond said.
These findings have proven relevant to real-world policy, with central bankers drawing on their lessons in 2020 when markets seized up at the start of the pandemic.
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"The banking system is in reasonably good shape right now, much better than it was in 2008," Diamond said.
Diamond is among dozens of University of Chicago faculty to receive a Nobel Prize.
Several past winners were on hand to congratulate Diamond, including Eugene Fama, who won the prize for economics in 2013.
"Maybe getting married was a little bigger, having four kids," Fama said, "but next to that, this was the biggest thing in life."
The Nobel Prize comes with an award of more than $885,000 to be split equally among the 3 laureates. Diamond said he's still deciding what he will do with his winnings, but for now, it's back to work on finishing up another paper.