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Financial Markets

Yale,, Spring 2008 , Prof. Robert Shiller

Updated On 02 Feb, 19

Overview

Finance and Insurance as Powerful Forces in Our Economy and Society - The Universal Principle of Risk Management: Pooling and the Hedging of Risks - Technology and Invention in Finance - Portfolio Diversification and Supporting Financial Institutions (CAPM Model) - Insurance: The Archetypal Risk Management Institution - Efficient Markets vs. Excess Volatility - Behavioral Finance: The Role of Psychology - Human Foibles, Fraud, Manipulation, and Regulation - Guest Lecture by David Swensen - Debt Markets: Term Structure - Stocks - Real Estate Finance and its Vulnerability to Crisis - Banking: Successes and Failures - Guest Lecture by Andrew Redleaf - Guest Lecture by Carl Icahn - The Evolution and Perfection of Monetary Policy - Investment Banking and Secondary Markets - Professional Money Managers and Their Influence - Brokerage, ECNs,Guest Lecture by Stephen Schwarzman - Forwards and Futures - Stock Index, Oil and Other Futures Markets - Options Markets - Making It Work for Real People: The Democratization of Finance - Learning from and Responding to Financial Crisis I (Lawrence Summers)

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Lecture 26: Learning from and Responding to Financial Crisis II (Lawrence Summers)

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Lecture Details

Financial Markets (ECON 252)

In the second of his two lectures in honor of Arthur Okun, Professor Summers points out that real interest rates have been very low in the current subprime crisis. This indicates that the shock to the economy was more a financial breakdown shock than a disinflation shock. But financial breakdown shocks are not necessarily very harmful to the economy, so long as financial intermediation capital is not destroyed. In a financial crisis like the present one, financial firms are likely to take the step of decreasing their leverage, often by contracting loans, which creates its own risks for the economy. Regulators should place pressure on financial institutions to raise their capital and should intervene in near foreclosure situations, but should not attempt to support housing prices.

Complete course materials are available at the Open Yale Courses website httpopen.yale.educourses

This course was recorded in Spring 2008.