Market Efficiency after the Financial Crisis: It's Still a Matter of Information Costs

Compared to the worldwide financial carnage that followed the Subprime Crisis of 2007–2008, it may seem of small consequence that it is also said to have demonstrated the bankruptcy of an academic financial institution: the Efficient Capital Market Hypothesis (“ECMH”). Two things make this encounter between theory and seemingly inconvenient facts of consequence. First, the ECMH had moved beyond academia, fueling decades of a deregulatory agenda. Second, when economic theory moves from academics to policy, it also enters the realm of politics, and is inevitably refashioned to serve the goals of political argument. This happened starkly with the ECMH. It was subject to its own bubble—as a result of politics, it expanded from a narrow but important academic theory about the informational underpinnings of market prices to a broad ideological preference for market outcomes over even measured regulation. In this Article we examine the Subprime Crisis as a vehicle to return the ECMH to its information cost roots that support a more modest but sensible regulatory policy. In particular, we argue that the ECMH addresses informational efficiency, which is a relative, not an absolute measure. This focus on informational efficiency leads to a more focused understanding of what went wrong in 2007–2008. Yet informational efficiency is related to fundamental efficiency—if all information relevant to determining a security’s fundamental value is publicly available and the mechanisms by which that information comes to be reflected in the security’s market price operate without friction, fundamental and informational efficiency coincide. But where all value-relevant information is not publicly available and/or the mechanisms of market efficiency operate with frictions, the coincidence is an empirical question both as to the information efficiency of prices and their relation to fundamental value. Properly framing market efficiency focuses our attention on the frictions that drive a wedge between relative efficiency and efficiency under perfect market conditions. So framed, relative efficiency is a diagnostic tool that identifies the information costs and structural barriers that reduce price efficiency which, in turn, provides part of a realistic regulatory strategy. While it will not prevent future crises, improving the mechanisms of market efficiency will make prices more efficient, frictions more transparent, and the influence of politics on public agencies more observable, which may allow us to catch the next problem earlier. Recall that on September 8, 2008, the Congressional Budget Office publicly stated its uncertainty about whether there would be a recession and predicted 1.5 percent growth in 2009. Eight days later, Lehman Brothers had failed, and AIG was being nationalized

Noncommutative Toda Chains, Hankel Quasideterminants And Painlev'e II Equation

We construct solutions of an infinite Toda system and an analogue of the Painlev'e II equation over noncommutative differential division rings in terms of quasideterminants of Hankel matrices.Comment: 16 pp; final revised version, will appear in J.Phys. A, minor changes (typos corrected following the Referee's List, aknowledgements and a new reference added

Building the field of health policy and systems research: framing the questions.

In the first of a series of articles addressing the current challenges and opportunities for the development of Health Policy & Systems Research (HPSR), Kabir Sheikh and colleagues lay out the main questions vexing the field

The EU and Asia within an evolving global order: what is Europe? Where is Asia?

The papers in this special edition are a very small selection from those presented at the EU-NESCA (Network of European Studies Centres in Asia) conference on "the EU and East Asia within an Evolving Global Order: Ideas, Actors and Processes" in November 2008 in Brussels. The conference was the culmination of three years of research activity involving workshops and conferences bringing together scholars from both regions primarily to discuss relations between Europe and Asia, perceptions of Europe in Asia, and the relationship between the European regional project and emerging regional forms in Asia. But although this was the last of the three major conferences organised by the consortium, it in many ways represented a starting point rather than the end; an opportunity to reflect on the conclusions of the first phase of collaboration and point towards new and continuing research agendas for the future

Poisson -- Boltzmann Brownian Dynamics of Charged Colloids in Suspension

We describe a method to simulate the dynamics of charged colloidal particles suspended in a liquid containing dissociated ions and salt ions. Regimes of prime current interest are those of large volume fraction of colloids, highly charged particles and low salt concentrations. A description which is tractable under these conditions is obtained by treating the small dissociated and salt ions as continuous fields, while keeping the colloidal macroions as discrete particles. For each spatial configuration of the macroions, the electrostatic potential arising from all charges in the system is determined by solving the nonlinear Poisson--Boltzmann equation. From the electrostatic potential, the forces acting on the macroions are calculated and used in a Brownian dynamics simulation to obtain the motion of the latter. The method is validated by comparison to known results in a parameter regime where the effective interaction between the macroions is of a pairwise Yukawa form

The Integration of HIV/AIDS Care and Support into Primary Health Care in Gauteng Province

The information contained in this publication may be freely distributed and reproduced, as long as the source is acknowledged, and it is used for non-commercial purposes.This study aimed to assess the integration of HIV/AIDS care and support in Gauteng’s primary health care (PHC) services. With this aim in mind, the research sought to provide answers to three main sets of questions. Firstly, are care and support services for people with HIV/AIDS being provided at PHC clinics, what is the quality of these services, and to what extent are these services being utilised? Secondly, are the inputs (e.g. staff knowledge and attitudes) and support systems (e.g. drug supplies), necessary for good quality, accessible HIV/AIDS care, present in the PHC infrastructure? Thirdly, what if any, systems changes are required to improve the access and quality of PHC services for people living with HIV/AIDS? This research was conducted in collaboration with, and partly funded by, the Gauteng Provincial Department of Health which is in the process of disseminating primary health care clinical guidelines in the Province.Funders of the Health Systems Trust include : Department of Health (South Africa) Department for International Development (UK) Henry J. Kaiser Family Foundation (USA) Commission of the European Union Rockefeller Foundatio