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dc.contributor.authorLo, Andrew W.
dc.date.accessioned2011-10-20T15:21:51Z
dc.date.available2011-10-20T15:21:51Z
dc.date.issued2009-03
dc.date.submitted2009-03
dc.identifier.issn1757-6385
dc.identifier.urihttp://hdl.handle.net/1721.1/66515
dc.description.abstractPurpose – The purpose of this paper is to analyse regulatory reform in the wake of the financial crisis of 2007-2008. Design/methodology/approach – The paper proposes a framework for regulatory reform that begins with the observation that financial manias and panics cannot be legislated away, and may be an unavoidable aspect of modern capitalism. Findings – Financial crises are unavoidable when hardwired human behavior – fear and greed, or “animal spirits” – is combined with free enterprise, and cannot be legislated or regulated away. Like hurricanes and other forces of nature, market bubbles, and crashes cannot be entirely eliminated, but their most destructive consequences can be greatly mitigated with proper preparation. In fact, the most damaging effects of financial crisis come not from loss of wealth, but rather from those who are unprepared for such losses and panic in response. This perspective has several implications for the types of regulatory reform needed in the wake of the financial crisis of 2007-2008, all centered around the need for greater transparency, improved measures of systemic risk, more adaptive regulations, including counter-cyclical leverage constraints, and more emphasis on financial literacy starting in high school, including certifications for expertise in financial engineering for the senior management and directors of all financial institutions. Originality/value – The paper stresses how we must resist the temptation to react too hastily to market events, and deliberate thoughtfully and broadly, instead, craft new regulations for the financial system of the twenty-first century. Financial markets do not need more regulation; they need smarter and more effective regulation.en_US
dc.description.sponsorshipAlphaSimplex Group, LLCen_US
dc.description.sponsorshipMassachusetts Institute of Technology. Laboratory for Financial Engineeringen_US
dc.language.isoen_US
dc.publisherEmerald Group Pub.en_US
dc.relation.isversionofhttp://dx.doi.org/10.1108/17576380910962376en_US
dc.rightsArticle is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.en_US
dc.sourceLoen_US
dc.titleRegulatory Reform in the Wake of the Financial Crisis of 2007—2008en_US
dc.typeArticleen_US
dc.identifier.citationLo, Andrew W. “Regulatory reform in the wake of the financial crisis of 2007-2008.” Journal of Financial Economic Policy 1.1 (2009): 4-43.en_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.approverLo, Andrew W.
dc.contributor.mitauthorLo, Andrew W.
dc.relation.journalJournal of Financial Economic Policyen_US
dc.eprint.versionAuthor's final manuscripten_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/PeerRevieweden_US
dspace.orderedauthorsLo, Andrew W.en
dc.identifier.orcidhttps://orcid.org/0000-0003-2944-7773
mit.licensePUBLISHER_POLICYen_US
mit.metadata.statusComplete


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