scholarly journals Subprime crisis and instability of global financial markets

2010 ◽  
Vol 57 (2) ◽  
pp. 209-224
Author(s):  
Ognjen Radonjic ◽  
Miodrag Zec
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
Accurate Diagnosis ◽  
Financial Instability ◽  
Efficient Markets ◽  
Subprime Crisis ◽  
Efficient Markets Hypothesis ◽  
Current Financial Crisis ◽  
Illiquid Assets

In order to prescribe adequate remedies to treat the current financial crisis one has to understand what in the first place went wrong. An age ago, older generations wrote that disease could not be cured without an accurate diagnosis. In contrast to mainstream 'efficient markets hypothesis' we argue that Minsky's financial instability hypothesis gives numerous valuable insights into sources and possible consequences of current global financial crisis. Furthermore, two decades ago Hyman P. Minsky predicted possible developments and perils of ever growing process of securitization of illiquid assets.

scholarly journals FRACTAL MARKETS HYPOTHESIS AND THE GLOBAL FINANCIAL CRISIS: SCALING, INVESTMENT HORIZONS AND LIQUIDITY

2012 ◽  
Vol 15 (06) ◽  
pp. 1250065 ◽  
Author(s):  
LADISLAV KRISTOUFEK
Keyword(s):  
Financial Crisis ◽  
Complex Systems ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
Efficient Markets ◽  
Investment Horizon ◽  
Heterogenous Agents ◽  
Efficient Markets Hypothesis ◽  
The Global Financial Crisis ◽  
Underlying Processes

We investigate whether the fractal markets hypothesis and its focus on liquidity and investment horizons give reasonable predictions about the dynamics of the financial markets during turbulences such as the Global Financial Crisis of late 2000s. Compared to the mainstream efficient markets hypothesis, the fractal markets hypothesis considers the financial markets as complex systems consisting of many heterogenous agents, which are distinguishable mainly with respect to their investment horizon. In the paper, several novel measures of trading activity at different investment horizons are introduced through the scaling of variance of the underlying processes. On the three most liquid US indices — DJI, NASDAQ and S&P500 — we show that the predictions of the fractal markets hypothesis actually fit the observed behavior adequately.

scholarly journals A New Measure of Market Inefficiency

2021 ◽  
Vol 14 (6) ◽  
pp. 263
Author(s):  
Christopher R. Stephens ◽  
Harald A. Benink ◽  
José Luís Gordillo ◽  
Juan Pablo Pardo-Guerra
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Empirical Data ◽  
Financial Crises ◽  
Empirical Measure ◽  
Efficient Markets ◽  
Market Inefficiency ◽  
High Volatility ◽  
Efficient Markets Hypothesis

Financial crises, such as the Great Financial Crisis of 2007–2009 and the COVID-19 Crisis of 2020–2021, lead to high volatility in financial markets and highlight the importance of the debate on the Efficient Markets Hypothesis, a corollary of which is that in an efficient market it should not be possible to systematically make excess returns. In this paper, we discuss a new empirical measure—Excess Trading Returns—that distinguishes between market and trading returns and that can be used to measure inefficiency. We define an Inefficiency Matrix that can provide a complete, empirical characterization of the inefficiencies inherent in a market. We illustrate its use in the context of empirical data from a pair of model markets, where information asymmetries can be clearly understood, and discuss the challenges of applying it to market data from commercial exchanges.

Märkte, Monster, Modelle – kulturelle Geographien der Subprimekrise

2011 ◽  
Vol 55 (1-2) ◽  
Author(s):  
Christian Berndt
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Economic Geography ◽  
Black Box ◽  
Subprime Crisis ◽  
Market Making ◽  
Growing Body ◽  
Money Flows ◽  
Explosive Expansion ◽  
Current Financial Crisis

Markets, monsters, models: Cultural geographies of the subprime crisis. Inspite of almost four decades of market-based policies and the explosive expansion of speculative money flows, real financial markets have been largely treated as a black box in economic geography. Connecting with a growing body of literature that investigates processes of market-making, this paper calls for intensified efforts to understand how financial markets are produced, stabilized, and fall apart. Tentatively labeled “geographies of marketization”, this perspective is put to work on the example of the current financial crisis.

scholarly journals Understanding Financial Instability: Minsky Versus the Austrians

2016 ◽  
Vol 22 (1) ◽  
Author(s):  
Ludwig Van Den Hauwe
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Critical Evaluation ◽  
Central Planning ◽  
Financial Instability ◽  
Conceptual Level ◽  
Theoretical Frameworks ◽  
Historical Experience ◽  
The Global Financial Crisis ◽  
Cross Fertilization

AbstractAlthough Minsky’s interpretation of Keynes’s macroeconomics and essential message clashes with authoritative alternative interpretations, it has become increasingly influential during the years following the Global Financial Crisis, even in mainstream circles. This paper offers a critical evaluation of Minsky’s Financial Instability Hypothesis from the perspective of the alternative Austro-Wicksellian paradigm. Although some of the similarities and/or analogies between Minsky’s approach and that of the Austrian School suggest a more than merely superficial affinity between the two theoretical frameworks and although some scope for cross-fertilization between both approaches can be found, both theoretically and empirically, at a fundamental conceptual level both theories remain incompatible and difficult if not impossible to reconcile, in particular in terms of fundamental causality and in terms of policy conclusions and prescriptions. Despite the fact that Minsky’s policy conclusions are multifaceted and somewhat eclectic, they manifest a lack of familiarity with the conclusions of the Austrian analysis of the problems of central planning by Big Players such as Big Bank and Big Government. Both approaches also offer contrasting interpretations of the historical experience of the Global Financial Crisis.

Foucault against the Foucauldians? On the problem of the neoliberal state

Thesis Eleven ◽  
2021 ◽  
pp. 072551362110533
Author(s):  
Henry Maher
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
The State ◽  
Original Text ◽  
Relevant Today ◽  
The Global Financial Crisis

The survival of neoliberal forms of governance after their apparent repudiation during the Global Financial Crisis is a problem that continues to generate significant scholarly controversy. One of the most influential accounts of the survival of neoliberalism in the crisis draws on Michel Foucault’s The Birth of Biopolitics to claim that states intervening to support financial markets during the crisis was simply the neoliberal system working as expected. Returning to Foucault’s original text, I argue this account constitutes a systematic misreading because it treats Foucault as having developed an instrumentalist theory of the neoliberal state, a possibility Foucault explicitly rejected. I suggest that the reasons that led Foucault to reject an instrumentalist theory of the state remain just as relevant today, and accordingly argue for a return to Foucault’s methodological decision to treat neoliberalism not as a theory of state but as a discourse which constructs a novel bio-political governmentality.

Risk Factors in Equilibrium Models of Open Economies

2010 ◽  
pp. 23-28
Author(s):  
D. Kuz'min
Keyword(s):  
Risk Factors ◽  
Financial Crisis ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
Household Consumption ◽  
Equilibrium Models ◽  
Government Consumption ◽  
Cyclic Processes ◽  
The Usa ◽  
Liquidity Crisis

World liquidity crisis, which started in the USA in 2007, is reputed to be the first full-fledged global financial crisis. The liquidity crisis became global exactly due to the influence of large economies' national financial markets on many small ones. The analysis of the crisis expansion and development in these states (the USA, China, Iceland, Mexico, CEE countries) demonstrated that not only working accounts and reserves, but also foreign and internal borrowings, and therefore, household consumption, investments and government consumption proved to be affected by cyclic processes.

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