Tuesday, 28 January 2014

The Economist covers "Beliefs and Leverage"

Peter Koudijs and I have a paper that shows how much people change their risk appetite if they almost lost money... and The Economist last week covers it here
To say fear alters investors’ and lenders’ behaviour seems self-evident. But the study’s attempt to isolate the effect of personal experience on financial decisions (a subject examined in more detail in our sister column, “Free exchange”, this week) is potentially relevant to those learning not only how markets work but how to apply rigour to financial decisions of other kinds. Clearly, it pays to understand the dynamics of the markets in which a business operates—and recognising the impact of factors not necessarily captured by number-crunching is a part of that. 


Swiss Radio (Radio SRF) interviewed me about the recent bond issue of Bankia... bottom line, this is not a turning point. If you hand enough cash to a poorly-managed bank, it can eventually return to the capital markets...