Sudip Bandyopadhyay’s Blog

The efficient markets hypothesis is the catwalk supermodel of economics.  Strutting down the runway in haute couture, catwalk supermodels present an elegant stylized vision of fashion that bears scant resemblance to the reality of buying clothes on the high street.
Through its failure in successive crises – the 1987 stock market crash, the collapse of Long-Term [...]

Misaligned exchange rates are more often than not a prelude to trade friction. Yet so far, in spite of sporadic outbreaks of warlike political rhetoric between the US and China, currency misalignments between the world’s surplus savings countries and the world’s borrowers and spenders have not ended in disaster. Buy America provisions and bail-outs for [...]

Financial crisis have, by and large, exhibited a repetitive pattern, demonstrating the inability, or unwillingness, of financial market participants to learn.  Charles Mackay, in his book Extraordinary Popular Delusions and the Madness of the Crowds, says that while episodes of panic and disasters have their own distinctive features, they exhibit a common feature – that [...]

It is hardly surprising that even the brashest of boom towns is vulnerable in a financial crisis now tipping into a recession. But it did come as a bit of a surprise to Dubai.  It is, admittedly, a paradox that liquidity should be an issue in a region awash in surplus cash. But modern Dubai, [...]

Alan Greenspan, the former US Federal Reserve chairman, confessed that he had failed to anticipate the financial crisis and said “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity (myself especially) are in a state of shocked disbelief.” Mr.Greenspan had faith that banks were prudent enough to make [...]