Finance

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    Independent central banks are here to control inflation, but they help maintain fiscal discipline too

Independent central banks are here to control inflation, but they help maintain fiscal discipline too

In the 1990s, countries worldwide reformed their central bank laws, removing monetary policy from government control. While central banks can have other legal tasks, including balanced economic growth and financial stability, more independent banks focus principally on price stability. These newly independent central banks can change interest rates and target the exchange rate or money supply to ensure price […]

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    As sovereign wealth funds come of age, they grow rapidly but face a number of challenges

As sovereign wealth funds come of age, they grow rapidly but face a number of challenges

The global economy has witnessed the emergence of a new set of key actors over the last two decades. Sovereign wealth funds (SWFs) and pension funds (PFs) – or sovereign investors – have become pivotal players in global financial markets thanks to their liquidity, and continue to grow rapidly in number and in size. This group of highly heterogeneous […]

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    When even central banks use Twitter to communicate, the markets turn to social media

When even central banks use Twitter to communicate, the markets turn to social media

Not long ago, any conversation about social media on trading floors was mere curiosity. That started to change when on April of 2013 the U.S. Securities and Exchange Commission issued guidance permitting companies to use social media to communicate their announcements. If investors were still shaking their heads about this development, four months later billionaire investor Carl Icahn refocused […]

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    As venture capitalists cross borders, they look for institutional trust

As venture capitalists cross borders, they look for institutional trust

Venture capitalists (VCs) are increasingly investing across jurisdictions, with the vast majority of these cross-border investments being carried out in a syndicate of two or more VCs. This paradigm shift is of interest to governments seeking to further develop local immature venture capital markets by attracting both foreign funds and expertise. Researchers, such as my co-authors Daniel Hain, Daojuan […]

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    EU countries’ shadow economy should be included in credit rating calculations

EU countries’ shadow economy should be included in credit rating calculations

Few are those economists or politicians who could have imagined in advance the macroeconomic changes that have been taking place since the beginning of the last global economic crisis. In the early 2000s, it was unthinkable that some EU countries would come close to the economic, social and political collapse they have recently been experiencing. The public debt of […]

Why are commodity markets behaving like stock markets?

Ten years ago, a course on commodity markets would teach students that commodity returns are uncorrelated with the returns of other financial assets. Commodities were praised as excellent portfolio diversifiers, providing financial protection when it is needed most. Since the early 2000s, however, the behaviour of commodity prices has changed in fundamental ways. Popular investment commodities such as crude […]

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    Intra-industry competition informs stock markets investment decisions

Intra-industry competition informs stock markets investment decisions

There is a large and growing body of research on peer effects in social sciences.  For instance, the economics literature on education has dealt extensively with peer effects in the classroom.  One of the hypotheses in this literature is that students who are exposed to unusually low achieving cohorts tend to score lower themselves.  While it is hard for […]

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    Hollywood studios appear to plan sequels before they produce the original movie

Hollywood studios appear to plan sequels before they produce the original movie

The recent box office success of Jurassic World, the latest Jurassic Park sequel, reminded me of my study about the use of real options in the motion picture industry*, which examined the application of this accounting tool to movie sequels.

A real option is the right, but not the obligation, to undertake a business decision. More importantly, a real-options approach to […]