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Showing posts from November, 2013

CPD Courses on Risk and Investment

Queen’s University Management School is pleased to launch a new series of half day courses designed specifically for professionals with an interest in investment analysis and risk analytics.  Given the structure and content of these courses, they can count towards Continual Professional Development (CPD) activity, as required under FCA guidelines.  Each course can contribute towards four hours CPD, and upon completion of each course attendees receive a CPD certificate for their own records. The purpose of these courses is to develop a deeper understanding of financial markets, asset classes, and the inherent risk within financial markets. Emphasis throughout is placed on what this means in practice for the investor.  These courses will be based in the First Derivatives Trading Room and make use of live market feeds via Bloomberg.
Further information and online registration is available here.

Independent Scotland's Money

The blueprint for Scottish independence was released a few days ago - you can read a summary here. For most people, whether or not independence is a good thing largely revolves around the economic costs and benefits of dissolving the union. What currency should an independent Scotland use? In the blueprint, Alex Salmond states that "the pound is Scotland's currency just as much as it is the rest of the UK's". See the super video below produced by the National Institute of Economic and Social Research which explains what money is, the alternatives facing an independent Scotland, and why Salmond's proposal may not be workable (hat tip: Chris Colvin).

Uncertainty and Quantifying Risk

Prof. Sheila Dow was the external examiner of my PhD thesis. She is an extremely thoughtful and insightful economist. Well before the financial crisis, she was talking about the need for economists to think more about uncertainty - there are many things in life we cannot measure or quantify. In the video below, she talks about uncertainty, the financial crisis and regulation among other things.  

From Rags to Riches

How mobile is our society? How easy is it to go from rags to riches? An integral part of the American Dream is that American society has high degrees of social mobility. Pew's Economic Mobility Project has been studying social mobility in the United States. In a recent report, they looked at the characteristics of those who are socially mobile (and note even these are the minority as most people are not socially mobile). In the United States, the upwardly mobile are more likely to be white, married and have a college degree. Wall Street Journal coverage of this research is here.

Sin Stocks

Does being an ethical investor pay? Does avoiding so-called sin stocks pay? See the FT video below which discusses the relative merits of an ethical investment strategy. Interestingly, a recent paper in the European Journal of Political Economy entitled Religion and Returns in Europe finds that the relative strength of Protestantism in a country depresses the share prices of alcohol and tobacco companies.

Religion and Socioeconomic Status

In a recent NEP-HIS Blog post, Chris Colvin reviews a paper by Mohamed Saleh (Toulouse) which looks at the relationship between socioeconomic status and religion. One of the big debates in this literature is whether religion results in better socioeconomic status or whether socioeconomic status determines religiosity. Saleh's paper looks at the effect of a tax on non-Muslims in Egypt which was imposed from 640 until 1856. He finds that poor Copts converted to Islam to avoid the tax whereas wealthier Copts didn't. This may explain why non-Muslims are traditionally better off than the Muslim majority in Muslim countries today. Saleh's paper is available here.




Bringing Economics Back to Life

Economics has never been more popular. More students are taking it at A-level than ever before and the appetite of the general public for economics has probably never been greater. Why? The financial crisis and rising inequality have all played a role in making economics more popular. 
In the midst of this resurgence, the undergraduate economics syllabus has come in for a lot of criticism. Why? Economics as taught at many universities is too abstract and totally divorced from reality. Students spend too much time doing mathematics rather than learning about the actual economy. Economics is an empirical discipline, but economics students don't get immersed in economic data. Too little time is devoted to trying to understand how the banking and financial systems work. Too few students understand why the 2008 crisis happened. Too few students know about economic history and the history of economics. 
Thankfully, there is the beginnings of a change in direction. Diane Coyle, a profes…

Shadow Banking

Shadow banking played a major role in the 2008 financial crisis. In the video below, the FT looks at the growth of non-bank lenders such as REITs since 2008. This growth is a byproduct of cheap funding flowing from Quantitative Eeasing. The issue, of course, is that we could be simply storing up problems for the future.

Books for Students

What books should students of economics and finance read? FIVE has an interview with John Kay, where he recommends five books that every student of economics and finance should buy and read. I can endorse two of his recommendations -  Germs, Guns, and Steel by Jared Diamond and The Wealth and Poverty of Nations by David Landes. Indeed, these two books should be read by anyone with an interest in economic development and economics.

Is the Fed Driving the Equity Market?

Following Janet Yellen's dovish comments during her confirmation hearing, John Authers from the Financial Times has been looking at how the stock market has been responding to Quantitative Easing and the Fed's signals about the future.  

The Retreat from Marriage

Over the past three to four decades, there has been a retreat from marriage in the West. For example, even in a conservative society like Northern Ireland, 42 per cent of births occur outside marriage (according to NISRA demography statistics). One interesting feature of this retreat from marriage is that there is a stark difference between socioeconomic groups. In particular, the retreat from marriage has been greatest among the least educated and poorest sections of society - this holds true across most countries. Click here to read a VOX piece on why this might be the case. The conclusion of the authors is as follows: "As the gains to household specialisation have decreased and cohabitation has become a socially acceptable mechanism for obtaining the benefits of a joint household, the practical significance of marriage has shifted away from a commitment device that facilitates a long-term gendered division of labour towards one that supports high levels of parental investment i…

Unconventional Monetary Policy

Central banks around the world have engaged in unconventional monetary over the past five years. Quantitative Easing (where central banks create money to buy long-dated governments bonds or even mortgage-backed securities) and forward guidance (where central banks commit to low interest rates until certain criteria are met) are the new tools in the central banking tool-kit.  However, many commentators are concerned about the distributional consequences of these policies i.e., that they benefit Wall Street at the expense of Main Street. Indeed, in this WSJ article, the Fed's former main Quantitative Easer argues that Fed has been captured by Wall Street banks and is pursuing these unconventional policies at their behest. In other words, the Fed is no longer an independent central bank! Click here for an op-ed by Raghuram Rajan, the Governor of the Reserve Bank of India, on unconventional monetary policy.

Revisiting the Great Depression

The Economist has a really nice piece this week on the Great Depression. Why did it happen? What can we learn from it for the current crisis? Have the lessons from the Great Depression been abused by contemporary policy-makers and central bankers? 
We face two dangers when looking at the past to obtain lessons for today. First, the situation and institutions today may be totally different from the past, and thus applying lessons from the past is anachronistic at best. Second, we may have a totally wrong-headed understanding of what happened in the past.

Is Europe Heading for Deflation?

The ECB's interest rate cut last week was in the response to falling prices in the Eurozone and the rise of the general fear that Europe is heading for deflation. See below an FT interview with the head of macro markets at Goldman Sachs about this subject and click here to read a Wall Street Journal article on this topic.




Bank of England Videos

The Bank of England has a series of short videos (with a nautical theme) explaining how the Bank works. The first one is below and the rest can be accessed here.

Social Mobility Over 800 Years

How mobile is our society? Do parental characteristics explain their child's social outcomes? How easy is it for someone to get ahead if their parents are at the bottom of the social ladder? In a fascinating study, Neil Cummins and Greg Clark investigate social mobility in England over 800 years using surname evidence. The BBC have reported on the study here. Clark and Cummins find that social mobility is a lot lower than we previously thought and appears to be immune to government attempts at making society more mobile. Greg Clark has performed surname studies for other economies and has found similar results - see here.

Happiest Place in the UK

According to an ONS annual survey, Northern Ireland is the happiest place in the UK. Despite the political problems and weak economy, Northern Ireland seems to be a great place to live. Why? Is it culture, religion, genes or even the tap water?


Chief Behaviouralist Officer

Following on from last week's mini-series on behavioural economics, here is an interview with John Balz, Opower's Chief Behaviouralist Officer. Opower is a company which assists energy and utility companies around the globe promote energy efficiency. To do so, it uses insights from behavioural economics - see this Opower blog post for example.  

Finance and Fast Food

In a recent opinion piece, John Kay argues that to secure financial stability, banks should be treated like fast-food outlets or supermarkets. What does he mean by this? Quite simply, financial institutions and banks should be allowed to fail. No bailouts and no nursing of bust banks. We don't necessarily care if our local fast-food outlet or supermarket fails since there are lots of competitors. The same should be true for banks, but Kay argues that the lobbying power of banks means that they are protected by governments. I broadly agree with Kay on this point. In my forthcoming book, I trace the evolution of bank bailouts and rescues in the UK and argue that these rescues far from saving the banking system have weakened it. Just let banks fail.........

German Property Boom?

The Bundesbank has recently released a report on the state of the German property market - click here for the report and here for the Economist's coverage of the story. The Bundesbank fears that property prices are 20% overvalued. Is this concern an example of the Bundesbank's inert conservatism or is its concern well placed? Given that the Great Crash of 2008 and the Eurozone crisis had their roots in overvalued property markets, the Bundesbank is probably correct to be concerned about this development. In addition, the ECB's low interest rates will make it relatively easy for borrowers to finance house purchases in Germany.