This paper highlights the impact of credit supply and aggregate demand sensitivity on 91 US industries stock performance during the 2007-2009 financial crisis. We account explicitly for changes in the market model and investigate, next to stock returns, the changes in systematic risk and...

Unlike my distinguished fellow panelists, I am not the head of a central bank. So I take my marching orders from the conference organizers. In this case, they asked me to ruminate on the extent to which central banks’ independence and credibility have been affected by their actions during the...

The stunning events of 2007-2009 both shook the world and piqued interest in economics. In the 30-plus years that I have been teaching macro principles, I have never seen the level of interest in students as high as what I observed last year rapt attention and no sleepers! Interest in economics...

Price bubbles are created by investors and customers. An analysis of price bubbles requires especially critical identification and assessment of the impact of various factors on this phenomenon. The analyses of crises primarily examine economic reasons and macroeconomic feedback and interaction,...

Current directives issued by the Basel Committee have established value-at-risk (VaR) as the standard measure to quantify market risk. In view of the wide range of applications and regulatory requirements, the development of accurate techniques becomes a topic of prime importance. VaR should...

The hedge funds industry received part of the blame, for the global financial crisis of 2007. An analysis of hedge funds during the crisis shows that the hedge fund industry had disastrous results. In spite of the difficulties, however, some funds did perform quite well. To address the issue of...

This paper examines the ongoing reputational crisis of credit rating agencies (CRAs) and asks if the CRAs are playing a credible role in financial markets. The current crisis supports the proposition of scepticism on the credibility of CRAs which did not properly disclose risk and thus...

This paper addresses the discussion between economic power and the power of politics with particular focus on financial markets. After general reflections about the economic basis of power, the paper discusses in a general equilibrium framework how financial innovations can lead to risk creation...

Officials must show that they understand why and how the public's confidence in the federal government's ability to manage financial turmoil was lost. Leaders of the Treasury, Federal Reserve, and the U.S. Securities and Exchange Commission must face up to their institutions' roles in an...