What Can Capital Markets Teach Us About Learning?
2021, June 17th 4.30 pm
The seminar will be held online
What can capital markets teach us about learning? Not much, says orthodox finance, since the market as a whole already knows. Not much, says behavioral finance, since markets behave irrationally despite strong incentives not to. With those caveats, let us imagine a capital market dominated by artificially intelligent virtual robots (“bots”), who (i) know that trends might change in ways they cannot fully foresee, (ii) rationally digest all available information to learn all they can, and (iii) aim to maximize their long-term wealth by gambling on their predictions.
Both capital markets turn out to have an uncanny resemblance to real life-markets. Prices are excessively volatile compared to dividends, and exhibit GARCH-like behavior with volatile surges in volatility. Disagreements are rife, with trading far too frequent to ascribe to risk management alone. Equity risk premia are high despite modest risk aversion. Debt markets persistently warn too little too late about unsustainable sovereign debt burdens.
Together with Kent Osband, Economist, Chief Risk Officer, SBlocks (and formerly at IMF, Rand Corporation, the World Bank), this seminar will provide a non-technical overview of these findings and draw out some broader implications.
Director of the Institute for Studies on the Mediterranean
National Research Council
Chief Risk Officer, SBlocks
Discussion and Q&A Session
No registration required
Documents available for partecipants (by Kent Osband):
Salvatore Capasso, Director of the Institute for Studies on the Mediterranean, National Research Council (CNR-ISMed); Valerio Filoso (Università degli Studi di Napoli Federico II)
INFO AND CONTACTS:
Institute for Studies on the Mediterranean (CNR-ISMed)
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