The Finance Research Center launches The Journal of New Finance
Mainstream Modern Finance has been challenged by the 2007-08 crisis and is undergoing a paradigm crisis. We are also observing the inability of the tools used by standard macroeconomics to provide reliable forecasts. In both disciplines, critics have started a disorganized offensive, but for the moment orthodoxy still rules.
Regulators have also admitted the inadequacy of the pre-crisis regulatory environment. Still, in order to address the crisis and guarantee financial stability in the future, they have added stacks of new requirements based on the theories belonging to Modern Finance. What are the certainties that the same flaws that led to error ten years ago, are not at work today?
We believe that an ambitious research program should make standard practice the analysis of the failures of the discipline, emphasizing the model flaws and the potential unintended consequences.
After all, Cliff Asness warned that: “Making people understand that there is a risk (and a separate issue, making them bear that risk) is far more important, and indeed far more possible than making a riskless world. And if I may go further, trying to create and worse, giving the impression you have created, a riskless world makes things much more dangerous.”