Financial markets

Jean-Pierre Landau, 27 June 2022

The crash in crypto currency valuations may trigger a radical reassessment. But, just as excessive hype fuelled speculation, a collapse in valuations may lead to an indiscriminate condemnation of digital money and an underestimation of its potential benefits. This column takes stock of developments over the last five years in an attempt to separate fact from exaggeration and fiction.

Jon Danielsson, Robert Macrae, 25 June 2022

Bitcoin is often sold as protection against adverse macroeconomic outcomes. This column argues that this depiction as a macro hedge does not stand up to scrutiny. Recent events – from Covid and inflation to war – provide a window into what sort of asset bitcoin actually is. It if were a true macro hedge, bitcoin would be positively correlated with macroeconomic uncertainty. Instead, it acts as a leveraged bet for speculators. And unlike gold, which has been trusted as a macro hedge for millennia, bitcoin requires access to electricity and the internet, precarious services in times of turmoil.

Alex Edmans, Doron Levit, Jan Schneemeier, 17 June 2022

Responsible investing has become an increasingly popular practice, with the blanket exclusion of ‘brown’ industries – such as tobacco, gambling, and fossil fuels – widely regarded as its purest form. This column suggests that in some cases, ‘tilting’ (leaning away from a brown sector but keeping an industry leader) is a more effective strategy than shunning the industry outright. Though exclusion may work best for such industries as controversial weapons, tilting is preferable for an industry, such as fossil fuels, in which managers can be pressured to take corrective action.

Claudio Borio, Stijn Claessens, Nikola Tarashev, 07 June 2022

The financial sector has a key role to play in supporting the green transition, but it is unrealistic to expect that it can drive the required reallocation of resources in the absence of adequate environmental policymaking in the real economy. This column argues that such unrealistic expectations could undermine financial stability and may derail the green transition itself. Moreover, the risks to financial stability are two-sided. Next to the risks that have attracted the bulk of the attention – those linked to exposures against overvalued emissions-intensive assets – one should not underestimate those linked to exposures to overvalued ’green’ assets or assets that purport to be green.

Alex Edmans, 27 May 2022

Alex Edmans asked this question in his keynote at the Financial Management Association Annual Meeting and offered some provocative answers. He tells Tim Phillips about passion, luck, originality, and the value of teaching.

Download the free DP and read more about the research behind this:
Edmans, A. 2021. 'The Purpose of a Finance Professor'.CEPR. 

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