Trust and financial markets: Lessons from the Madoff fraud
Bernard Madoff used funds provided by new investors to pay some of his clients over many years.* This mechanism, known as a Ponzi scheme, made thousands of victims. But how could such a fraudulent system thrive on so large a scale for such a long time? Hervé Stolowy and his co-authors analyzed the mechanisms at work and looked at the role trust played in the fraud’s origins and subsequent development.
The Art Market - Understanding Changes in Prices
From an economist's point of view, the question of the fluctuating value of works of art is intriguing. William Goetzmann, Luc Renneboog, and Christophe Spaenjers tackle the problem, seeking to explain what determines changes to prices in the art market—a market characterized by the singularities of individual buyers and its sensitivity to economic fluctuations.
Real options for optimal investment strategies
How can companies optimize their long-term investment decisions? To answer this question, Bertrand Quélin and Charlotte Krychowski have studied the use of real options. Drawing on the case of a cell phone provider, have shown that by making experimentation possible, this method often proves more effective than future cash flow analysis.
Sending Signals: The Meaning of Equity vs. Cash
Markets are the settings for all types of financial transactions, so considering them closely makes it possible to better understand prominent business deals. Ulrige Hege and Stefano Lovo’s study on the impact of acquisitions on the stock share value of both buyer and seller has generated insight as to how market value is created. They have focused on the currency used for transactions— cash vs. equity—and on the type of acquisition— complete vs. partial (like a business unit).