The Gordon Gekko Effect: The Role of Culture in the Financial Industry / Andrew W. Lo.

Format:

Book

Author/Creator:

Lo, Andrew W.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21267.

NBER working paper series no. w21267

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Gordon Gekko Effect

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Culture is a potent force in shaping individual and group behavior, yet it has received scant attention in the context of financial risk management and the recent financial crisis. I present a brief overview of the role of culture according to psychologists, sociologists, and economists, and then present a specific framework for analyzing culture in the context of financial practices and institutions in which three questions are answered: (1) What is culture?; (2) Does it matter?; and (3) Can it be changed? I illustrate the utility of this framework by applying it to five concrete situations--Long Term Capital Management; AIG Financial Products; Lehman Brothers and Repo 105; Société Générale's rogue trader; and the SEC and the Madoff Ponzi scheme--and conclude with a proposal to change culture via "behavioral risk management."

Notes:

Print version record

June 2015.