Suchergebnisse

Purpose
This study aims to critically review recent contributions to the methodology of financial economics and discuss how they relate to one another and directions for further research.


Design/methodology/approach
A critical review of recent literature on new methodologies for financial economics.


Findings
Recent books have made important contributions to the study of financial economics. They suggest new approaches that include an emphasis on radical uncertainty, adaptive markets, agent-based modeling and narrative economics, as well as extensions of behavioral finance to include concepts such as diagnostic expectations. Many of these contributions can be seen more as complements than substitutes and provide fruitful directions for further research. Efficient markets can be seen as holding under particular circumstances. A major them of most of these contributions is that the study of financial crises and other aspects of financial economics requires the use of multiple theories and approaches. No one approach will be sufficient.


Research limitations/implications
There are great opportunities for further research in financial economics making use of these new approaches.


Practical implications
These recent contributions can be quite useful for improved analysis by researchers, private participants in the financial sector and macroeconomic and regulatory officials.


Originality/value
Provides an introduction to these new approaches and highlights fruitful areas for their extensions and applications.

PurposeThe purpose of this paper is to stress the role that several defective theories or views of the world played in generating the subprime financial crisis.Design/methodology/approachThis is done by describing these views, showing that they were widely held by relevant decision makers, and by analyzing the flaws in these views. A considerable amount of literature is surveyed in the process.FindingsIt was found that these defective views did play a major role in generating the crisis.Research limitations/implicationsImplications of the analysis for future research are discussed.Practical implicationsImplications of the analysis for reform of private and public sector financial policies are discussed.Originality/valueWhile most of the arguments in the paper are not new, no paper of which the author is aware pulls them together with the same emphasis on how faulty mental models interacted with dangerous incentive structures to play a prime role in generating the crisis. The paper also references a much wider range of literature on the crisis than any study of which the author is aware. The paper should be of value to any one interested in the causes of the crisis and ways to make future crises less likely.