Finance

  • Permalink Gallery

    Comparing the coronavirus crisis to 2008 is inevitable, but they’re quite different

Comparing the coronavirus crisis to 2008 is inevitable, but they’re quite different

Coronavirus is having a strong impact on the world economy. What about the financial system? Is a systemic financial crisis likely, perhaps along the lines of the crisis 12 years ago in 2008, or even the Great Depression of the 1930s?

There are certainly similarities: widespread bankruptcies, liquidity shortages, large losses and some financial institutions may fail. Still, that in itself does […]

  • Permalink Gallery

    Popular governments may be a sign of future financial crises

Popular governments may be a sign of future financial crises

One well-documented predictor of financial crises are credit booms and capital flow bonanzas. Indeed, many banking and current account crises (sudden stops) have been preceded by unusual expansion of domestic and/or external credit (see for example Reinhart and Reinhart 2008, Forbes and Warncock 2012, Schularick and Taylor 2012, Mendoza and Terrones 2012). To the best of our knowledge, however, […]

Predicting bank distress with machine learning

The great American baseball sage, Yogi Berra, is thought to have once remarked: ‘It’s tough to make predictions, especially about the future’. That is certainly true, but thankfully the accelerating development and deployment of machine learning methodologies in recent years is making prediction easier and easier. That is good news for many sectors and activities, including microprudential regulation. In […]

March 12th, 2020|Finance, LSE alumni|0 Comments|

The effect of structural reforms on public debt  

There is broad consensus on the desirability of making markets more efficient, across several economies to increase competitiveness and improve future growth prospects (OECD, 2012; European Commission, 2013; IMF, 2016; OECD, 2012).  In the current policy context, advancing structural reforms is of paramount importance to address the decline in productivity growth — the key long-term driver of living standards — […]

  • Permalink Gallery

    The growth of environmental, social and corporate governance in investing

The growth of environmental, social and corporate governance in investing

The wealth management industry is continuously changing. As we have seen over the last few years, active management is falling out of fashion and has become less ‘fashionable’ with asset allocators every year this millennium. In the last decade since the global financial crisis, we have seen the relentless expansion of the passive management industry and a consumer base […]

February 26th, 2020|Environment, Finance|0 Comments|

Putting sustainable finance into practice

Ensuring that their investment portfolio contribute to the long-term sustainability of the planet is one of the key challenges organisations face today. That means adopting prudent financing and a thoughtful investment strategy. But how can financial sector players go about doing that? Sustainable finance raises a lot of practical questions. Many initiatives have been launched to provide businesses with […]

  • Permalink Gallery

    Retail banks are far from obsolete: they are needed more than ever in the age of data

Retail banks are far from obsolete: they are needed more than ever in the age of data

The internet has fundamentally reformed a number of industries. Newspaper publishing lost the deep moat that investment in printing presses and distribution once represented. Music publishing went the same way. Now the quantity of data that online devices can gather makes it possible to start programming useful machine learning and artificial intelligence applications. Alexa can parse your mood.

What will […]

February 4th, 2020|Finance|0 Comments|

Fuelling procompetitive growth with foreign credit

The debate about the desirability of international financial flows is at the centre of the discussion of researchers and policy makers. This article focuses on one key aspect of capital controls: their impact on firms’ access to capital markets and their consequences for competition and aggregate productivity growth. Indeed, cross-country studies report that the deregulation of international capital flows […]

  • Permalink Gallery

    There is a ‘good’ reason for EU banks to hold their own country’s sovereign debt

There is a ‘good’ reason for EU banks to hold their own country’s sovereign debt

Is it possible to attribute the banks’ home bias in sovereign exposure to something beyond their externally-imposed (such as moral suasion) or internally-distorted (such as risk-shifting) incentives? Despite the so-called doom loop between the two, could the relationship of banks with their domestic governments have an underexplored silver lining?

These are the questions I pursue in a recent paper. By […]

  • Permalink Gallery

    Cyber risk governance should take centre stage in financial services

Cyber risk governance should take centre stage in financial services

It feels as though cyber risk has crept up on us without warning and with great intensity.

We have come a long way from the days when our palm pilots had to be hot-sync’d through a docking station and the occasional hazard was from viruses transmitted as email attachments. Over the years, we have embraced extreme connectivity combined with extreme […]

December 4th, 2019|Finance, IDEAS, LSE Authors|0 Comments|
  • Permalink Gallery

    How to change the paradigm in finance to incorporate a changing environment

How to change the paradigm in finance to incorporate a changing environment

Climate change poses existential threats to global prosperity, but political and economic systems are unprepared for responding to that risk. Governance, incentives and thinking are still misaligned. The financial and corporate sectors could play an important role in turning the tide by truly managing for long-term value creation, i.e. by managing for positive financial, social and environmental returns in […]

December 2nd, 2019|Environment, Finance|0 Comments|

Do tweets from CEOs matter to investors?

Social media provides today’s CEOs a quicker and more direct way to communicate with investors. The Securities and Exchange Commission cleared public companies to use social media to disclose information as long as investors know which social media sites will be used.

Despite the growth in CEOs’ social media use, we know little about how such use affects investors, and […]

November 29th, 2019|Finance|0 Comments|
  • Permalink Gallery

    Do six per cent of financial transactions sent via the Swift system really fail?

Do six per cent of financial transactions sent via the Swift system really fail?

In May 2019, Brad Garlinghouse, CEO of a San Francisco based (but Delaware registered) fintech firm called Ripple Labs gave a presentation to the 9th High-Level Conference on the International Monetary System. The small audience included Christine Lagarde (then chairman of the IMF) and the heads of several central banks. He described a problem in the world financial system […]

What’s wrong with bank culture?

Each year I give an undergraduate lecture on student loans. It is a thoroughly depressing two-hour slot. But each year it also reminds me how the student experience has changed since I began my undergraduate degree in 1997. One memory stands out in particular. It is the memory of visiting four large UK retail banks in my local village […]

October 9th, 2019|Finance|1 Comment|

What’s slowing down the European Banking Union?

Many observers believe that implicit bank bailout guarantees were an important driver of the global financial crisis. They also blame national supervisory authorities as another key factor. As a consequence, the formation of the European Banking Union (EBU) was presumably the single-most important institutional response of the European Union (EU) to ensure that taxpayers’ money is not used again for […]

October 8th, 2019|Finance, LSE alumni|0 Comments|
  • Permalink Gallery

    Bitcoin, ethereum and ripple: a fractal and wavelet analysis

Bitcoin, ethereum and ripple: a fractal and wavelet analysis

In recent years, repeated boom-bust cycles in cryptocurrencies valuations have generated waves of media and public attention, helping to attract a growing number of retail and professional investors to this new asset class. Regulatory environment and markets research, however, lag these developments.

In general, there is no consensus in the markets and amongst regulatory authorities as to the preferred classification […]

October 7th, 2019|Finance|0 Comments|

The efficiency of the IPO market: homo economicus lives

In the initial public offering (IPO) market, sophisticated issuers with considerable sums at stake acquire underwriting services from a large number of capable and highly competitive investment banks. Neoclassical economics implies that such a market will (well, really, must) reach an efficient equilibrium. Yet, in practice, the IPO market has a number of highly unusual features that has led […]

Bitcoin: from currency to investment

While attending the 2019 American Sociological Association annual conference in New York, I came across an advertisement that nicely captures the competing visions within the bitcoin community. The ad (Figure 1) depicts a scene from the American Revolution, illustrated in pointillist style to evoke American paper currency. A slogan, “The revolution needs rules,” overlays a throng of white men, each […]

  • Permalink Gallery

    Why investors should not attach too much meaning to daily changes in the stock market

Why investors should not attach too much meaning to daily changes in the stock market

The stock market moves a lot on a day-to-day basis. Today the S&P 500 index may be up 1 per cent, and tomorrow it may be down 1 per cent. And although news commentators may be forced to relate it to some news about the economy, it is rare to come across news that may add or destroy the […]

  • Permalink Gallery

    Crises in the financial markets tend to bring liberalisation to a temporary halt

Crises in the financial markets tend to bring liberalisation to a temporary halt

Large economic and political turbulence occurs in the aftermath of financial crises. What starts as panic in a single financial market or institution usually propagates rapidly to other agents of the economy and might necessitate an urgent and decisive reaction from policymakers. However, it is difficult to predict, a priori, whether the reaction of policymakers to the crisis would […]