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Por qué los mercados financieros son tan ineficientes y explotadores, y una propuesta de solución

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Listed:
  • Paul Woolley

    (Paul Woolley Centre for the Study of Capital Market Dysfunctionality)

Abstract

The essay offers a new understanding of how financial markets work. The key departure from conventional theory is to recognize that investors do not invest directly in securities but through agents such as fund managers. Agents have better information and different objectives than their customers (principals) and this asymmetry is shown as the source of inefficiency: mispricing, bubbles and crashes. A separate outcome is that agents are in a position to capture for themselves the bulk of the returns from financial innovations. Principal/agent problems do a good job of explaining how the global finance sector has become so bloated, profitable and prone to crisis. Remedial action involves the principals changing the way they contract with, and instruct agents. The essay ends with a manifesto of policies that pension funds and other large investors can adopt to mitigate the destructive features of delegation both for their individual benefit and to promote social welfare in the form of a leaner, more efficient and more stable finance sector.

Suggested Citation

  • Paul Woolley, 2010. "Por qué los mercados financieros son tan ineficientes y explotadores, y una propuesta de solución," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 12(23), pages 55-83, July-Dece.
    • Handle: RePEc:rei:ecoins:v:12:y:2010:i:23:p:55-83
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    File URL: http://www.uexternado.edu.co/facecono/ecoinstitucional/workingpapers/pwoolley23.pdf
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    References listed on IDEAS

    as
    1. Ron Bird & Susan Thorp, 2010. "Hedge Fund Excess Returns Under Time-Varying Beta," Working Paper Series 9, The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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    More about this item

    Keywords

    financial markets; principal-agent;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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