This paper provides a taxonomy of market imperfections built around the economic forces underlying them. Market imperfections affect virtually every transaction in some way, generating costs which interfere with trades that rational individuals make, or would make in the absence of the...

It has become almost conventional wisdom that investors should avoid funds with high expense ratios. Like many nuggets of conventional wisdom, there is some truth, but many exceptions: some of the best funds come at the price of higher expense ratios. Financial planners need this type of...

The risk of compliance comes from the failure to comply with laws, regulations, rules, self-regulatory standards, and codes of conduct. This article focuses on the evolving scenario of the compliance function within banks, investment and insurance companies operating in Italy. We developed four...

This paper examines the results of a survey carried out in 2007 by the Bank of Italy concerning different characteristics of the organization of lending activities. Between 2003 and 2006 the physical distance between the headquarters and the branches increased, the limits to the decision-making...

In this fifth article in the Economists’ Hubris series, we investigate the practical applications of eight papers that won best-article awards in 2008 and 2009 from the Journal of Finance or the Journal of Financial Economics, the two leading journals in finance. We find that these articles...

The emergence of cloud banking in developing economies from billions of cell phones transacting both legal tender and informal units of accounts has created a need to reconsider habits of thinking about the nature of money and banking in advanced societies. The dysfunctional nature of modern...

In recent years, a large number of IPOs of public exchanges have been announced. These were mainly in response to growing pressure from the institutional investor community and intense competition from Alternative Trading Systems, such as ECNs. When these announcements were initially made, most...

This paper looks at the implications of September 11th on the financial services industry. Our research finds that despite these horrific events, the securities industry will be able to post its fifth best performance of all time. This has been made possible by a combination of falling interest...

Over the past decade, European exchanges have undertaken enormous reforms in their trading platforms and internal governance. Automation of trading combined with the internationalization of the major trading institutions has significantly intensified pressures for the consolidation of exchanges...

In this paper, we have highlighted the potential implications of a move in the U.S. to T+1 on European financial institutions. We explain that while many European institutions feel that they are sheltered from this move, those that undertake trading activities in the U.S. will find that they...