Post-crisis securities market supervision policies – standard finance versus behavioural finance

IAN, EDDIE and JINGHUI, LIU and PHUONG, DUONG (2015) Post-crisis securities market supervision policies – standard finance versus behavioural finance. In: International Conference on Advances in Economics, Social Science and Human Behaviour Study - ESSHBS 2015, 21 - 22 February 2015, Hotel Lebua at State Tower.

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Abstract

the objective of this paper is to analyze the imprints of standard finance and behavioral finance on Securities Market Supervision (SMS) policies before the 2008 Global Financial Crisis (GFC) and to discuss the question why the SMS policies should adopt behavioral finance as a response to issues identified from the crisis. Standard finance has been the most influential theoretical underpinning for securities market supervision before the 2008 GFC. The philosophy of securities market supervision has for long time relied on the notions of Efficient Market Hypothesis (EMH) and Capital Asset Pricing Model (CAPM). Relying on standard finance, securities regulators believed that market is efficient and investors are rational. Therefore securities markets were let to regulate themselves. Emerging behavioral finance provided a different insight, which argues that market is not efficient and investors are bias due to their cognitive errors. The debate between two economic theories seemed endless. However, the 2008 GFC made securities regulators and economists rethink their conceptual framework of market supervision. A supervisory philosophy based more on behavioral finance may be an option for the development of policies for market regulation and supervision in post-crisis economic and political environment

Item Type: Conference or Workshop Item (Paper)
Uncontrolled Keywords: behavioural finance, standard finance, securities market, securities market supervision, global financial crisis (GFC), IOSCO, EMH
Depositing User: Mr. John Steve
Date Deposited: 07 May 2019 10:59
Last Modified: 07 May 2019 10:59
URI: http://publications.theired.org/id/eprint/2028

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