Sustainable finance ended 2018 on a high. Never before has so much capital been committed to integrating environmental, social and governance (ESG) factors. But financial markets also entered an unnerving cycle. If we are not careful, growing financial turbulence could divert attention away from the urgent need to scale up investment in climate action and sustainable development. Instead of […]
As we approach the date for leaving the EU, the government has been publishing a series of statutory instruments (U.K. secondary legislation), on-shoring and amending EU regulations ahead of Brexit. This is being done under the European Union (Withdrawal) Act 2018. During the past weeks risks in this sector linked to a no deal scenario have increased significantly. However, despite […]
In the second quarter of 2018 global debt reached a new peak, climbing to 260 trillion dollars ($260,000 billion). At the same time, the global debt to GDP ratio crossed the 320 per cent threshold for the first time. Of that total, 61 per cent (160 trillion) is private debt of the non-financial sector, while only 23 per cent […]
In the past few years there has been a cavalcade of regulations imposed on European capital markets. While most of these changes are observable only to practitioners, some of them have had immediate visible effects for retail investors. One such rule is the necessity for a ‘key investor document’ (KID) for certain investment products.
A principle aim of global regulators […]
The boom of social media in the past decade has transformed the way investors forecast the stock market. As social media provides large volumes of real-time user opinion, investors can potentially exploit that information by leveraging machine learning and natural language processing techniques. In recent years, popular news channels have repeatedly reported that predicting the market using “alternative data”, […]
Until Donald Trump’s election campaign in 2016, it appeared as if the United States was dragging the increasingly resistant European Union into the Transatlantic Trade and Investment Partnership (TTIP). The settlement of investment disputes figured prominently among the reasons for the anti-TTIP mood in Europe. For instance, an article in the Independent in 2015 commented that “TTIP’s biggest threat […]
The collapse of Lehman Brothers on 15 September 2008 was the most significant single event of the ‘Great Financial Crisis’ (GFC). In his new book, Crashed, Adam Tooze writes that, “After September 15, 2008, avoiding another Lehman became an idee fixe of crisis managers around the world.” And since then one of the fastest-growing activities in the US and the […]
What happens to corporations that misbehave? Are they all punished? Are they all punished in the same way? Despite the cases that attract significant media attention and the potential legal consequences of misconduct, there is no guarantee that all corporations that misbehave will face the same punishment (or even any punishment).
One of the more visible types of punishment, and […]
Bank of England’s policymakers have unanimously voted to raise the policy rate from 0.5 per cent to 0.75 per cent. The hike, which was widely anticipated by the financial markets, made critics of Bank of England Governor Mark Carney rethink their accusations that the Governor behaves like an “unreliable boyfriend” in the sense that he keeps hinting an interest rate […]
Starting in the 1970s, various countries deregulated their banking systems and abandoned the strict rules that governed financial institutions since the Great Depression. Deregulation was intended to increase competition in the credit market, improve consumers’ welfare but it has been indicated by many observers to be at the roots of the 2008 financial crisis. Despite the large interest in […]
Sovereign Wealth Funds (SWFs) are investment funds set up by national governments as a means of saving – potentially across generations – a proportion of foreign exchange inflows, typically as a result of windfalls from natural resources, but also, in some circumstances, from manufactured goods export booms and/or even agricultural surpluses. They may also serve as a stabilisation device […]
The European Commission is increasing its pace towards completing the European Banking Union. A European Deposit Insurance Scheme (EDIS) should be the Banking Union’s third pillar. Germans are very sceptical of EDIS, in part because Germany has never had a single deposit insurance scheme. Instead, cooperative banks, savings banks and private banks administer their own deposit insurance systems without […]
Most economists assume that bond prices merely reflect fundamental factors such as the bond’s interest rate, its face value and the likelihood that the bond issuer defaults. Bond issuers that are more likely to default will have to offer a higher interest to compensate the buyer for the higher risk.
Most economists stop here. However, for real-world bonds, it is […]
The period 1990 to 2009 has witnessed private firms being promoted as independent borrowers in the global capital market. For a sample of 85 emerging market economies, in terms of percentage measures, the private sector publicly non-guaranteed share of total external debt on average increased from less than 5 per cent in 1990 to about 17 per cent in […]
Why do asset price bubbles in real markets happen? Experimental asset markets have pursued the reasons for a long time. Our research clarifies them by distinguishing between two effects, confusion and strategic uncertainty.
The asset price bubbles observed in real markets are often regarded as irrational exuberance, as pointed by Professor Robert Shiller (Nobel laureate in 2013). However, we succeed […]
An article by Kathleen Kahle and René M. Stulz on LSE Business Review analyses the shrinking number of public corporations in the US. We find this phenomenon also in Germany. In our study, we find a decline in the number of listed companies in Germany driven by a decline in initial public offerings (IPOs) and an increase in delistings:
Society could save billions of dollars every day if trading in commodities, energy and securities was made more competitive and efficient through a minor rule change. That is the topic of my new research paper.
Every day, auctions and exchanges around the world trade bonds, stocks, currencies, electricity, metals, commodities, securities and financial instruments worth trillions of dollars. Thus even […]