MIT Sloan Management Review

Much of the time, high-frequency trading firms play a benign role in financial markets. These firms use fully automated computer systems to buy and sell stocks very rapidly, making thin profits by being ahead of human orders.

But in a nervous market with downward price pressure, high-frequency trading can create fierce volatility. A computer simulation of high-frequency trading behavior showed that a complex system “may turn into an unfamiliar monster when an invisible tipping point is passed.”

Financial institutions’ funding decisions makes them gatekeepers for sustainable development. But how do they develop the policies and procedures that will guide how they make decisions and satisfy stakeholders? According to Olivier Jaeggi of ECOFACT, effective decision-making for sustainability can be summed up in a set of seven best practices.

Crédit Agricole, the sixth largest bank in the world, puts its money where its principles are in its recently released social and environmental policies. In keeping with its stated policy of supporting projects that are “sustainably vitalizing,” the bank’s policies prohibit funding energy projects that rely heavily on unsustainable fuels.

Kathleen Long is using a combination of behavioral analytics, Bayesian engineering and big data to help companies better determine and mitigate business risk.

In these days of uncertain markets – and an uncertain economy – risk can seem almost omnipresent. But how do you manage risk prudently – yet still grow your company? Harvard Business School professor Robert S. Kaplan began exploring risk management in the wake of the 2008 financial crisis, after he saw venerable firms such as Lehman Brothers and Bear Stearns collapse – despite having risk management functions. Here are a few of his insights on the topic of risk management.

An impressive group of economists -- one that included numerous MIT alumni, including a number of winners of the Nobel Memorial Prize in Economic Sciences -- assembled at MIT Thursday for an economics and finance symposium that is part of MIT's 150th anniversary celebration.�

Are there more financial crises in store for the world economy? MIT Sloan School Professor Simon Johnson thinks so.

Columbia University professor Joseph Stiglitz gave a thought-provoking presentation at the World Business Forum conference in New York last week.

Finance professor Andrew Lo addresses “physics envy” among economists — and the importance of understanding the levels of uncertainty you face.

Over the past decade, a number of the world’s respected companies have collapsed. A factor was these companies’ approach to risk management. Two different views have evolved on how risk should be assessed. The first — the frequentist view — is based on historical data. The second, or Bayesian, considers risk to be in part a judgment of the observer. Many measures are being deployed to prevent future crises — a shift from frequentist to Bayesian risk management should be part of this effort.

U.S. President Barack Obama declared this week that he is in favor of letting tax cuts for the rich expire; those tax cuts were enacted under George W. Bush. 

Letting all the Bush-era tax cuts (for both the wealthy and others) expire would aid the U.S.

Most executives naturally gravitate toward one of these two approaches. The challenge is that companies need both.

There's a fabulous talk by Paul Krugman on MIT World that spells out the Nobel Laureate, New York Times columnist, and -- most important -- ex-MITer's argument that today's policymakers are moving too timidly to solve our world's massive economic problems. It's smart, convincing stuff.

Last week, The Wall Street Journal reported some striking remarks from former U.S. Federal Reserve Board Chairman Paul Volcker.

MIT Sloan Professor Simon Johnson gave a talk here at MIT today -- with the cheery title of "The Next Financial Crisis."

Harvard economist Kenneth Rogoff gave a fascinating guest lecture at MIT earlier this week -- looking at commonalities in a number of financial crises. Rogoff, who recently coauthored a new book, This Time is Different: Eight Centuries of Financial Folly with Carmen M.

When venture capitalists are more tolerant of failure, the successful companies in their portfolio tend to be more innovative.

Friday we offered selected pearls from a great conversation between banking honcho Larry Fish and MIT Sloan economist (and leading financial crisis commentator) Simon Johnson.

Now we can share full sound and video.

Two of us at MIT Sloan Management Review grabbed good seats at yesterday’s MIT Sloan campus-event headliner: a downwind reflection on fallout from the financial crisis. Featured attraction: a high-level round of bank bashing, with a high-level banker on hand to help do it.

A new study explores the relationship between venture capitalists’ location and their investments — and finds some quite intriguing results.