Finance

Asset classes have long been the building blocks of investment portfolios, but when apparently uncorrelated investments moved in sync during the financial crisis, it raised fundamental questions about whether diversified portfolios actually were diversified. Eugene Podkaminer ’01, vice president of capital markets research at Callan Associates, discusses whether there is a better way to understand the deep forces driving these results.

Any financial institution that is going to last for decades will have to survive a crisis or two—most likely by adapting and innovating, perhaps by leaving behind chunks of its old identity. Yale Insights spoke with James Gorman, chairman and CEO of Morgan Stanley, one of two major investment banks to survive the 2008 financial crisis, about how the firm has managed to refashion itself and prepare for the future.

Hedge funds are risky. But getting beyond that bromide and evaluating the prospects of a particular fund means understanding everything from internal operations to investors’ incentives to counterparty and market conditions. David Belmont ’92, chief risk officer of Commonfund, gives a tour of the inner workings of hedge fund risk.

In a New York Times op-ed, Professor Robert J. Shiller writes that Bitcoin is a speculative bubble with a doubtful future, but its legacy should be that we move toward a system of stable economic units of measurement backed by sophisticated forms of electronic payment.

Each time it happens, it seems in retrospect like people have lost their minds, and that such widespread madness could never happen again. And then it happens again. Yale SOM professor William Goetzmann looks back at an investing mania from the 18th century to better understand the forces that can create such distortions.

The concluding discussion of the three-day Business + Society conference was titled “Finance in Society,” and dealt with both the tension and the possibility in that relationship.

Six highly influential policymakers surveyed the current state of the world’s major financial institutions and discussed how to prevent another crisis.

The financial crisis of 2008 is a looming figure in current economic thinking. The global economy is still slowly recovering from the shock, and policymakers and academics continue to discuss the structural changes needed to prevent a recurrence. The stress of the last half decade has made two things very clear: A productive and innovative financial system is essential to the broader economy, but financial innovations made irresponsibly—without consideration of systemic risk and other impacts on society—can wreak havoc.

Was the 2008 financial crisis a one-time event or the first example of a new pattern? Professor Gary Gorton argues that the history of banking shows that there’s a real risk of future upheaval in financial markets.

The increasing complexity of financial instruments, the growing globalization of markets, and the increasing scale of major financial institutions all collided in the financial crisis of 2008. Has the crisis changed the markets for good? Should we expect major shifts in the long-term returns and volatility of different asset classes? What are the long-term consequences of automated trading, globalization, and other macro-trends?