Robert Shiller contends that the recent financial crisis was caused not by greed and dishonesty but by the structural shortcomings of financial institutions. He suggests that the financial industry can serve the common good through financial innovation that creates the kind of inclusive society in which all can benefit.
We have myopically come to believe that competition is the highest expression of our nature and the solution to our pressing business and policy dilemmas. Yet in capitalism, as in nature itself, cooperation is a foundational element that should not be overlooked.
Eugene F. Fama argues that the central consequences of the financial crisis are increased moral hazard, ineffective new regulations, and greater risk taking as investors search for yield. He also presents his responses to criticisms of the efficient markets hypothesis, from behavioral biases to momentum, and discusses skill and luck in active investment management and the identification of the best managers.
Anxiety is an instinctively powerful force that stands in the way of good investment decisions. Here are some timeless tips for overcoming its effects.
Analysts must assert three essential rights, says the veteran banking analyst: the right to ask for information, the right to get information, and the right to act on information.
In a lecture presented in 2004, John Bogle, founder of the Vanguard Group, documented a direct and substantial relationship between management costs and mutual fund returns. Stratifying all funds by expense ratio, from lowest to highest, he reported the following 10-year average annual returns by quartile: 10.7 percent, 9.8 percent, 9.5 percent, and 7.7 percent. A presumption of market rationality would lead one to expect that investors demanded reduced fees in response to this negative correlation. According to Bogle, however, the average equity fund’s expense ratio was on a long-run rise, which represented a gain for mutual fund operators but an aggregate loss for the consumers they served.
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