Japan doomsdayfears premature Nov 18, 2009
I am no adherent of efficient markets reasoning (in a nutshell, according to that reasoning, prices can't be wrong - they tell us everything we can possibly know at any particular moment about the future), but given that most of the doomsayers generally subscribe to orthodox free-market economics, they have some explaining to do ... That's the whole point behind the efficient markets hypothesis - that if enough investors believe the yen and the JGBs are headed for steep falls, then they will by... (Asia Times Online)
Kloppers 'cautious' on global economy Nov 18, 2009
He said much depended on Asia's biggest nations growing strongly and that required a peaceful, stable region and efficient markets within a free-trade system. "No single country can make that happen, everyone must do their bit," he said. (Sydney Morning Herald -- Business)
Transcript of an Interview with Ricardo Caballero, Ford International Professor of Economics, Massachusetts Institute of Technology, about The Shock of Financial Crises Nov 17, 2009
Do you think that if we're going to understand phenomena like financial crises, as economists we need to move away more from this traditional rational agent efficient markets type of viewpoint. MR. CABALLERO: You said it well. (IMF News)
Valuing Bonds, Dollar Is Crazy in World Gone Mad Nov 5, 2009
Whether or not you believed in efficient markets, you could be sure the price of a bond, a currency or a commodity was trying to tell you something about the outlook for growth, inflation or monetary policy; all you had to do was listen and translate. Not anymore. (Bloomberg -- Columnists)
Economy flawed Oct 30, 2009
Fortunately, while some economists were pushing the idea of self-regulating, fully efficient markets that maintain full employment, other economists and social scientists have been exploring different approaches. These include agent-based models that emphasise the diversity of circumstances; network models that focus on the complex interrelations among firms (such as those that enable bankruptcy cascades); a fresh look at the neglected work of Hyman Minsky on financial crises (which have... (Sydney Morning Herald -- Business)
Buttonwood: Squaring the circle Oct 23, 2009
But while opinion has veered away from believing in efficient markets, can they really be that inefficient. After all, the inflation camp should not just be buying gold, it should be shorting government bonds (ie, betting on a falling price). (The Economist)
Conditons point to another lost decade Oct 18, 2009
Katsenelson, the author of "Active ValueInvesting": Making Money in range-bound markets," said it is also important to pay attention to the price-earnings ratio of the S&P 500, which averaged roughly 15 since 1900. "P-Es will continue to fall from their current average of 21 to below 15, which will put pressure on stock prices," he said. Katsenelson isn't alone in thinking investors are looking at a second Lost Decade. "Because the Federal Reserve is acting to smooth out business cycles, the... (New York Post -- Business)
Sensibly done, government regulation of the financial markets can work a treat. Oct 12, 2009
In a nutshell: because our central bankers, econocrats and politicians never fell for the extreme deregulatory, ''efficient markets hypothesis'', let-markets-have-their-heads-and-all-will-be-well nonsense the Yanks and Brits swallowed. You'd think these delusions were now thoroughly discredited. (Sydney Morning Herald -- Business)
Crimp my ride Oct 4, 2009
The University of Chicago law professor and philosopher Brian Leiter recently asked Andrew Rosenberg, a philosopher of economics at Duke University, to weigh in on the raging debate between the neo-Keynesians, who support some version of the president s stimulus package, and the efficient markets school, one of awhose home bases is Leiter s own institution ... The efficient markets thesis is that the market makes complete use of all relevant information, and the proof is roughly that in a... (Boston Globe)
Outside the bubble Sep 19, 2009
The point of the efficient markets hypothesis is that sort of stuff is not supposed to happen. . (Sydney Morning Herald -- Business)
Economists are calling for major reform while we still have the opportunity. Sep 15, 2009
The best that can be said is that the efficient markets idea has been discredited, and future consideration of regulation should start from the premise that financial markets can't be trusted to get things right on their own,'' he says. Certainly, we are not interested in a big review,'' Corporate Law Minister Chris Bowen told The Age earlier this month. (Sydney Morning Herald -- Business)
Weakening... Sep 9, 2009
Third-ranked Singapore has gone up two places since last year's survey mainly because of increased confidence in the country's public institutions, efficient markets for goods and labor, as well as high-quality financial markets, according to the poll. Sweden maintained its fourth rank, while Denmark slipped two ranks to fifth. (The Drudge Report)
CME Group's Donohue to be a Panelist Wednesday at Joint SEC-CFTC Regulatory Harmonization Meeting Sep 2, 2009
"The goal of harmonization is to assure that the regulators of futures, swaps, security-swaps, securities and security options effectively work together to: promote efficient markets, provide safe central counterparty clearing houses and eliminate regulatory gaps," Donohue said. "Harmonization does not include a merger of the existing regulatory structures into a single set of one-size-fits-all rules administered by separate agencies. This would lead to duplicative regulation, which is costly,... (PR Newswire)
Argus Responds to European Commission Consultation on OTC Derivative Market Regulation Aug 31, 2009
"We welcome measures to protect the consumer and deter market manipulation and other unfair business practices. Intelligent and sensitive regulation can play an important role in encouraging efficient markets, but it is vital to ensure that this is effective, appropriate and enforceable and does not undermine what it is designed to protect. Argus will continue contributing to this industry debate and our compliance team will work with regulators to ensure the best possible outcome," Argus Media... (PR Newswire)
Ben Bernanke: The very model of a modern central banker Aug 28, 2009
Jeremy Grantham, a fund manager, has said Mr Bernanke s faith in efficient markets was so strong that he could not see a once-in-a-century bubble in home prices because such a bubble wasn t supposed to be possible. Mr Greenspan is blamed for planting the seeds of the crisis by holding interest rates low after the 2001 recession, but Mr Bernanke provided ample intellectual cover for the strategy. (The Economist)
What are big companies not telling you now? Aug 26, 2009
The extent to which investors are provided with a clearer picture of all types of risks including those categorized as environmental, social, and governance factors (ESG) is key to efficient markets. In fact, it can determine if markets run smoothly or falter spectacularly. (Christian Science Monitor)
U.S. CFTC, U.K.'s FSA to Boost Cooperation in Supervising Energy Markets Aug 21, 2009
It is important that we continue to pursue all means to maintain fair, orderly and efficient markets, both nationally and internationally, the FSAs Turner said in a statement. Crude Gains. (Bloomberg -- UK)
Time to get real Aug 20, 2009
Bloomberg had the story about how "The global financial crisis has blown a hole in the 'efficient markets' theory on which modern economics and modern finance have been based, said Richard Thaler, a professor of economics and behavioral science at the University of Chicago ... he said the theory assumes that everyone in the economy behaves rationally, which is like leaving friction out of account when doing physics. It consists of two assertions: that asset prices are right, in the sense that... (Asia Times Online)
Regulating human nature Jul 21, 2009
The push for financial regulatory reform has highlighted an important debate surrounding the Efficient Markets Hypothesis (EMH), the idea that market prices are rationally determined and fully reflect all available information. If true, the EMH implies that regulation is largely unnecessary because markets allocate resources and risks efficiently via the Invisible Hand. (FT.com -- Markets)
Bring back the car commercials! Jul 15, 2009
How does an efficient markets theorist justify such a rapid upsurge in near-random noise and unpredictable volatility. Can this really be seen as a useful process of price discovery. (Salon)
more. Tuesday, July 14, 2009 Jul 14, 2009
Back in April, author of "A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation," considered the rising computer tide in a post titled " He concluded that the trend was without social benefit. ... [A]rms races are negative sum games. The arms in this case are not tanks and jets, but computer chips and throughput. But like any arms race, the result is a cycle of spending which leaves everyone in the same relative position, only poorer. Put another way, like any... (Salon)
Worst yet to come: White House economic advisor... Jul 12, 2009
The chief intellectual casualty of the current crisis has been the efficient markets school the theory, associated with such erstwhile laisser faire gurus as Alan Greenspan, that market participants are governed by rational expectations and markets are self-correcting. As an academic economist, Summers has studied the shortcomings of that approach but, working on Wall Street gave him, he says, a more visceral understanding of the self-referential character of markets: Markets... (The Drudge Report)
Africa: Full Text of G8 Pledge of U.S. $20 Billion for Agriculture [document] Jul 11, 2009
Open trade flows and efficient markets have a positive role in strengthening food security. National and regional strategies should promote the participation of farmers, especially smallholders and women, into community, domestic, regional and international markets. (allAfrica.com)
Swan rejects people's bank, ponders financial inquiry Jul 9, 2009
"Our framework was essentially the efficient markets theory," he said. "We thought we had found the ultimate fixed point in the universe, namely the market price, and so we built on top of that the regulatory framework. But then there was no market price. "The evolution we expected has stopped, reversed and gone the other way. (Sydney Morning Herald -- Australia)
Satrix as an entry to the stock market Jun 28, 2009
So its a very efficient market, and in efficient markets, worldwide, tracker funds are very hard to outperform. Bruce Whitfield: But that is the big issue here. (iAfrica.com)
Efficient markets theory is dead Jun 25, 2009
Financial Times FT.com. All times are London time. (FT.com -- Markets)
Post-crisis riches aheadfor East Asia leaders Jun 19, 2009
After a good, smart slap at academics and their infatuation with the efficient markets hypothesis for "making it even more likely that lessons from the pre-disinflationary era are not yet priced in", Napier notes that "investors unburdened by dreams of efficiency and prepared to learn the lessons of history will have a decided advantage in the search for positive real returns.". And what might those lessons be. (Asia Times Online)
CME has rival in new NY clearing house Jun 19, 2009
Top Finance Headlines. Top Government Headlines. (Crain's Chicago Business)
Crisis of faith for high priests of rational markets Jun 16, 2009
For the past five decades, the has been teaching the tenets of analysis based on efficient markets to tens of thousands of adherents around the world who work in the banks, fund mangers and investment houses that make-up the global financial system. EDITORS CHOICE. (FT.com -- Markets)
A credit card as irresistible as you are May 21, 2009
But the neuroscientific theory presents special challenges to long-dominant economic paradigms such as "rational actor" and "efficient markets" theory. Coates and Herbert. (Salon)
much more. Wednesday, May 20, 2009 May 20, 2009
"I happen to agree with that statement. Through his reporting, Andrews definitively makes the case that Wall Street's insatiable hunger for mortgages of any quality -- in fact, the worse the better! -- that could be bundled up into securities and then resold, provided the critical incentive encouraging the subprime mortgage sector to explode to such huge dimensions. As individuals, we do not deserve all the blame for living beyond our means -- we were encouraged to do so and seduced into doing... (Salon)
COMMENT: The Virtue Of Rejuvenation May 12, 2009
Marrying behavioural insights to the efficient markets formula, MITs Andrew Lo went beyond both to produce the adaptive markets hypothesis. This says the illusion of security producing excessive risk appetite in boomtime dissipates during busts when markets must kick old habits. (India Times, India)
A sob story from the vultures who forced Chrysler into bankruptcy May 1, 2009
"But if the Chrysler negotiations are any guide, bank creditors aren't going to simply agree to take whatever haircut the White House suggests. Cutting a deal with Citigroup's lenders will be several orders of magnitude more gnarly than coming to a settlement on the debt of a car company that, for all its legendary name-brand renown, really isn't much of a player in the auto industry anymore.Chrysler's for practice. Then it gets serious.UPDATE: At midnight EDT, the Wall Street Journal and... (Salon)
Obama versus the hedge funds Apr 30, 2009
It's a pretty fundamental insight that has helped to undermine the "efficient markets" theory that itself has long been used to justify the idea that markets know best. There's a smart guy in the White House. (Salon)
Central banks: Monetary maze Apr 28, 2009
Macroeconomics in general has come under fire for depending too much on assumptions of efficient markets and its inability to incorporate the spasms of emotion that create economic manias and panics. As a monetary policymaker I have found the cutting edge of current macroeconomic research totally inadequate in helping to resolve the problems we currently face, said Mr Blanchflower, a labour economist, in a speech he gave on March 24th. (The Economist)
Bankers vs. Economists Apr 15, 2009
It turns out that the worldview that many economists hew toa system of efficient markets populated by rational actors and by owners/managers who naturally take action to preserve the value of their companiescan't really account for the actions during the credit bubble (or in any other bubble, for that matter). The set of theories upon which many economists relyagain, I know I'm painting with a really broad brush hereis out of vogue and is being replaced by a set of funkier ones,... (Slate)
Standard & Poor's Publishes White Paper on Credit Rating Agency Business Models Apr 13, 2009
Transparent and efficient markets, whereby all public ratings are available to all investors, large and small, without charge and at the same time. A process for arriving at ratings opinions that is free from conflicts of interest and independent of issuers, investors, and governments through regulated oversight of policies, processes, and procedures and robust competition. (PR Newswire)
Of, by, and for the Bondholders Apr 11, 2009
When in trouble, bondholders have always looked to Washington for relief. - By Daniel Gross - Slate Magazine. (Slate)
* Science of capitalism crashes on the shores of human hubris Apr 3, 2009
Markets might once have been fairly efficient before we had the theory of efficient markets. If investing is simply a matter of allocating money to an index, however, liquidity becomes the sole determinant of prices and valuations go haywire. (Taipei Times, Taiwan -- Sports)
'The Unexpected' Is Key To Human Learning Mar 15, 2009
Similar to an economic theory, where efficient markets respond to unexpected events and expected events have no effect, we found that the dopaminergic system of the human brain seems to be wired in a similar rational manner -- tuned to learn whenever anything unexpected happens but not when things are predictable," said Michael J. Kahana, senior author and professor of psychology at Penn s School of Arts and Sciences. Zaghloul worked with Kahana and Gordon Baltuch, associate professor of... (Science Daily)
* Fault lies with economists, not the economy Mar 13, 2009
Finance theorists have written reams on the consequences of the failure of the efficient markets hypothesis. Open-economy macroeconomists examine the instabilities of international finance. (Taipei Times, Taiwan -- Sports)
Buttonwood: The grand illusion Mar 6, 2009
In efficient markets, such an anomaly should be arbitraged away. Belief in efficient-market theory made the authorities reluctant to restrain either the dotcom or the housing and credit bubbles. (The Economist)
* Little cause for cheer after World Economic Forum in Davos Feb 9, 2009
The so-called efficient markets model, which holds that prices fully and efficiently reflect all available information, also came in for a trashing. So did inflation targeting: the excessive focus on inflation had diverted attention from the more fundamental question of financial stability. (Taipei Times, Taiwan -- World Business)
