Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts
Thursday, May 17, 2012
Behavioural Economics and the Facebook IPO
Facebook, the social network,
has raised $16bn in an initial public offering that values the company at $104bn, meaning it is now among the 25 most valuable public groups in the United States. This recent article by John Wasik (Reuters Money) discusses whether or not it is a good idea to get a piece of the action. Daniel Kahneman declined to comment specifically on Facebook, but raised the importance of a number of behavioural biases: overconfidence, optimism-bias and anchoring; to name a few. Liam has blogged before on behavioural finance, and I flagged the work of James Montier in a comment on that post. Avanidhar Subrahmanyam's review of the behavioural finance literature is available here, free-to-access.
Sunday, March 18, 2012
Guardians of Finance
Via irisheconomy.ie, below on my reading list
Guardians of Finance
Making Regulators Work for Us
James R. Barth, Gerard Caprio, Jr. and Ross Levine
The recent financial crisis was an accident, a “perfect storm” fueled by an unforeseeable confluence of events that unfortunately combined to bring down the global financial systems. And policy makers? They did everything they could, given their limited authority. It was all a terrible, unavoidable accident. Or at least this is the story told and retold by a chorus of luminaries that includes Timothy Geithner, Henry Paulson, Robert Rubin, Ben Bernanke, and Alan Greenspan.
In Guardians of Finance, economists James Barth, Gerard Caprio, and Ross Levine argue that the financial meltdown of 2007 to 2009 was no accident; it was negligent homicide. They show that senior regulatory officials around the world knew or should have known that their policies were destabilizing the global financial system, had years to process the evidence that risks were rising, had the authority to change their policies--and yet chose not to act until the crisis had fully emerged.
The current system, the authors write, is simply not designed to make policy choices on behalf of the public. It is virtually impossible for the public and its elected officials to obtain informed and impartial assessment of financial regulation and to hold regulators accountable. Barth, Caprio, and Levine propose a reform to counter this systemic failure: the establishment of a “Sentinel” to provide an informed, expert, and independent assessment of financial regulation. Its sole power would be to demand information and to evaluate it from the perspective of the public--rather than that of the financial industry, the regulators, or politicians.
About the Authors
James R. Barth is Lowder Eminent Scholar in Finance at Auburn University and Senior Finance Fellow at the Milken Institute.
Gerard Caprio Jr. is William Brough Professor of Economics and Chair of the Center for Development Economics at Williams College.
Ross Levine is James and Merryl Tisch Professor of Economics and Director of the William R. Rhodes Center for International Economics and Finance at Brown University.
Guardians of Finance
Making Regulators Work for Us
James R. Barth, Gerard Caprio, Jr. and Ross Levine
The recent financial crisis was an accident, a “perfect storm” fueled by an unforeseeable confluence of events that unfortunately combined to bring down the global financial systems. And policy makers? They did everything they could, given their limited authority. It was all a terrible, unavoidable accident. Or at least this is the story told and retold by a chorus of luminaries that includes Timothy Geithner, Henry Paulson, Robert Rubin, Ben Bernanke, and Alan Greenspan.
In Guardians of Finance, economists James Barth, Gerard Caprio, and Ross Levine argue that the financial meltdown of 2007 to 2009 was no accident; it was negligent homicide. They show that senior regulatory officials around the world knew or should have known that their policies were destabilizing the global financial system, had years to process the evidence that risks were rising, had the authority to change their policies--and yet chose not to act until the crisis had fully emerged.
The current system, the authors write, is simply not designed to make policy choices on behalf of the public. It is virtually impossible for the public and its elected officials to obtain informed and impartial assessment of financial regulation and to hold regulators accountable. Barth, Caprio, and Levine propose a reform to counter this systemic failure: the establishment of a “Sentinel” to provide an informed, expert, and independent assessment of financial regulation. Its sole power would be to demand information and to evaluate it from the perspective of the public--rather than that of the financial industry, the regulators, or politicians.
About the Authors
James R. Barth is Lowder Eminent Scholar in Finance at Auburn University and Senior Finance Fellow at the Milken Institute.
Gerard Caprio Jr. is William Brough Professor of Economics and Chair of the Center for Development Economics at Williams College.
Ross Levine is James and Merryl Tisch Professor of Economics and Director of the William R. Rhodes Center for International Economics and Finance at Brown University.
Tuesday, February 08, 2011
Wages and Human Capital in the U.S. Financial Industry: 1909-2006
Fascinating paper by Thomas Philippon (New York University) and Ariell Reshef
(University of Virginia) on wages, skills and technology in the U.S. financial sector over the last 100 years.
Abstract
We use detailed information about wages, education and occupations to shed light on
the evolution of the U.S. financial sector over the past century. We uncover a set of
new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.
(University of Virginia) on wages, skills and technology in the U.S. financial sector over the last 100 years.
Abstract
We use detailed information about wages, education and occupations to shed light on
the evolution of the U.S. financial sector over the past century. We uncover a set of
new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.
Thursday, December 18, 2008
New Blog on the Irish Economy
Thanks to Stepehen Kinsella for pointing me towards the new blog on the Irish economy: http://www.irisheconomy.ie/. Featuring many of Ireland's top macroeconomists, this blog looks like an interesting read, and a valuable source of information on economic developments as they are happening in Ireland.
Macroeconomics and finance don't feature a whole lot on this blog, but the chart below caught my imagination when it was forwarded on by a friend this week. It shows that investing in U.K. government debt is almost twice as risky as buying bonds sold by McDonald’s Corp., based on prices in the credit-default swap market since June. “Talk about ‘McBritain’ is an insult to Ronald’s outfit,” said Sean Corrigan, chief investment strategist at Diapason Commodities Management SA in Lausanne, Switzerland.
I assume that Irish government debt would stack up in a similar position to British govt. bonds. I'm hoping to get some data on this soon; but in the meantime its fascinating to see how financial markets can view a corporation as more of a safe bet than a major European government. I wonder if the average Joe's 'perception of risk' would correspond accordingly. In saying all of that, these are times when Keynesianism may be more appropriate than expanding the monetary base (see here, here, here, here and here), and McDonald's are making sizeable profits during this global recession, as we mentioned before (here).
I got the chart for Ireland's government debt priced in the credit-default swap market for the same time period. Irish govt. debt is considered to be even riskier than the British counterpart, as well as a McDonald's bond.
Macroeconomics and finance don't feature a whole lot on this blog, but the chart below caught my imagination when it was forwarded on by a friend this week. It shows that investing in U.K. government debt is almost twice as risky as buying bonds sold by McDonald’s Corp., based on prices in the credit-default swap market since June. “Talk about ‘McBritain’ is an insult to Ronald’s outfit,” said Sean Corrigan, chief investment strategist at Diapason Commodities Management SA in Lausanne, Switzerland.
I assume that Irish government debt would stack up in a similar position to British govt. bonds. I'm hoping to get some data on this soon; but in the meantime its fascinating to see how financial markets can view a corporation as more of a safe bet than a major European government. I wonder if the average Joe's 'perception of risk' would correspond accordingly. In saying all of that, these are times when Keynesianism may be more appropriate than expanding the monetary base (see here, here, here, here and here), and McDonald's are making sizeable profits during this global recession, as we mentioned before (here).
Update on 19th December:
I got the chart for Ireland's government debt priced in the credit-default swap market for the same time period. Irish govt. debt is considered to be even riskier than the British counterpart, as well as a McDonald's bond.
Friday, November 28, 2008
Economics 2.0
"For decades, many of the brightest graduates in economics sought their fortune in finance. In coming years, they will seek it in marketing, as the Internet gives all companies the information-rich environment once available only in financial markets."
That’s the prediction of Hal Varian, Chief Economist at Google, and economist at the University of California at Berkeley. Varian discusses why marketing is the new finance in this Wall Street Journal article from last year.
Below, Varian gives a lecture on the "Economics of Internet Search", from this year's Calit2-sponsored series, "Behavioral, Social, and Computer Sciences Seminar Series" - Friday, May 23, 2008. Following on from the last post about 'The Weather and Work', apparently "it's good for Google if the weather is bad, but not too bad..."
That’s the prediction of Hal Varian, Chief Economist at Google, and economist at the University of California at Berkeley. Varian discusses why marketing is the new finance in this Wall Street Journal article from last year.
Below, Varian gives a lecture on the "Economics of Internet Search", from this year's Calit2-sponsored series, "Behavioral, Social, and Computer Sciences Seminar Series" - Friday, May 23, 2008. Following on from the last post about 'The Weather and Work', apparently "it's good for Google if the weather is bad, but not too bad..."
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