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The Dow has closed above 11,000, the European Union is bailing out Greece and the U.S. economy seems to be perking up. Is the
future as bright as it looks? In fact, it looks pretty good, says Wharton finance professor Jeremy Siegel. While the Dow's 11,000
close doesn't mean much to professional market watchers, it can give ordinary investors a psychological boost. According to Siegel,
the U.S. economy is in a self-sustaining recovery, no longer dependent on government stimulus. And while the housing market
could take years to make up recent losses, the economy -- and stocks -- should do well, he said in an interview with
Knowledge@Wharton.
Crisis, Contagion and Bailouts: What's Next for the European Union?
In the run-up to this week's announcement of the European Union's $960 billion stabilization plan, Wharton management professors
Mauro Guillén and Saikat Chaudhuri, and Jean Salmona, founder and chairman of the editorial board of ParisTech Review,
participated in an interview with Knowledge@Wharton on likely outcomes from the financial crisis facing Greece, some of its sister
countries and the European Monetary Union more generally. How did events spin so out of control? How will the politics of the crisis
affect the Eurozone's economic performance? Guillén, Chaudhuri and Salmona addressed these and other questions on May 7, just
before the huge financial support package was announced.
Bruised but Not Out: A Bullish View on the Future of Financial Innovation
The Great Recession has given a black eye to the tools of financial innovation. Collateralized debt obligations, synthetic derivatives
and other once-arcane investment vehicles are now the poster boys of what went wrong -- toxic players in the boom-and-doom
scenario of the housing implosion and market rout. But these highly opaque and complex instruments are not representative of real
financial innovation, which stresses transparency and responsible management of risk, argues Wharton finance professor Franklin
Allen in his new book, Financing the Future: Market-Based Innovations for Growth, co-written with Glenn Yago, executive director
of financial research at the Milken Institute. Financial innovation, properly used, has been the engine of growth through the
centuries, Allen says, and is especially needed now to get the world economy on track again.
'Painful Retrenchment': What Will It Take to Get Britain's Economy Back on Track?
After the United Kingdom's May 6 election failed to produce a clear winner, its citizens have found themselves facing an unfamiliar
situation -- the formation of Britain's first coalition government in more than six decades. Under Prime Minister David Cameron, the
new government faces many challenges, not the least of which is dealing with a massive budget deficit during a time of recession.
Experts weigh in on the state of Britain's economy and the strategies the new government should adopt to prevent yet another
reversal of fortune in Europe.
Improving Our Financial IQs: Why Managing Money Should Be a Lifetime Skill
It's no secret that many Americans are financially illiterate, or unable to understand basic principles of money management. To
address this situation, Wharton, Dartmouth and the Rand Corporation have established the new Financial Literacy Center, which will
develop "educational materials and programs that help foster saving and retirement strategies over the life cycle." Annamaria
Lusardi, an economics professor at Dartmouth who will help lead the new Center, and Michelle Greene, deputy assistant secretary
for financial education and financial access at the U.S. Treasury Department, spoke with Knowledge@Wharton about the Center's
goals and why individuals need to be more proactive about their financial health.
How the Public and Private Sector Could Work Together to Thaw a Future Credit Freeze
Financial institutions add to their woes during an economic downturn, experts say, by refusing to provide capital to worthy
businesses because they fear other lenders will also cut back. In the end, banks create a credit shortage that does even more to
extend the crisis and delay recovery. In a new paper, Wharton professor Itay Goldstein examines different approaches to halt an
over-reaching credit crunch and concludes that the private and public sectors should work together to direct money toward viable
businesses.
Ushering in a 'New Financial World' While Avoiding the Excesses of the Old
A panel at the recent Wharton Global Alumni Forum in Madrid was titled, "The New Financial World." "So, one might ask, what
happened to the old financial world?" was the question posed to Forum participants by Wharton finance professor Richard Marston,
who led the discussion. Marston asked his panelists to discuss the causes of the economic crisis, the ways in which increased
market volatility should be managed, and how the world can address credibility issues related to global imbalances.
Private Equity: 'Is the Golden Age Behind Us?'
Before introducing the panelists taking part in a session during the recent Wharton Global Alumni Forum in Madrid called
"Relaunching Private Equity," moderator Raffi Amit summarized the challenges that both venture capital and private equity face at a
time when investors have become more conservative, returns are down, and transactions have declined in both volume and value.
Panelists offered their views on the new investment climate, and suggested strategies for coping with today's tough economic
environment.
Intel Capital's Keith Larson: Venture Capital and the Impending Pension Crisis
What does the rapidly unfolding pension crisis in the United States have to do with venture capital firms in Silicon Valley? A lot,
according to Keith Larson, a vice president at Intel Capital. In a presentation at Wharton San Francisco, Larson outlined how pools
of money largely dedicated to safeguarding the retirements of public employees pumped the venture capital ecosystem full of cash
for the decade prior to the current recession -- and then dramatically reversed course.
Intel Capital's Keith Larson: Venture Capital and the Impending Pension Crisis
What does the rapidly unfolding pension crisis in the United States have to do with venture capital firms in Silicon Valley? A lot,
according to Keith Larson, a vice president at Intel Capital. In a presentation at Wharton San Francisco, Larson outlined how pools
of money largely dedicated to safeguarding the retirements of public employees pumped the venture capital ecosystem full of cash
for the decade prior to the current recession -- and then dramatically reversed course.
Basel III and Risky Banking Behavior: Too Little, Too Lenient, Too Late?
As the world haltingly recovers from the recession, regulators are struggling to modify the financial system to prevent another
crisis. The latest effort: stricter capital requirements to help prevent large banks from collapsing under the weight of unexpected
losses. While the new proposals -- called Basel III -- are designed to reduce risk-taking by assuring that banks continue lending in a
weak economy, Wharton faculty and others are skeptical that the new proposals will accomplish this goal.
How Ignoring the Fine Print Caused Indian Investors to Pay More for Less
For years, researchers have tried to determine if mutual fund investors pay attention to -- or simply ignore -- fees when choosing
where to put their money. Recent policy experimentation in the Indian mutual funds market provided data that sheds light on this
question. Wharton professor Santosh Anagol and PhD student Hoikwang Kim analyze what happened, finding that most investors
don't read the fine print on fees when choosing a fund -- a decision that often ends up hurting them financially.
Why Kenya's Elkanah Odembo Believes All Roads Should Lead Investors to Africa
Africa today contributes barely 1.5% to world trade, but its future is brighter than that number might suggest. The continent has a
growing middle class, institutions that are investing heavily in infrastructure, and in another decade, it will emerge as a market of
one billion consumers. Elkanah Odembo, Kenya's ambassador to the U.S., visited Wharton recently and spoke with
Knowledge@Wharton about the potential rewards and risks of investing in Africa.
The Big Pay Off: Why Hedge Funds Can't Afford to Ignore Risk Exposure
While to outsiders the hedge fund industry often looks like the Wild West, hedge funds aren't exactly betting the farm on a roll of
the dice. In fact, many hedge fund managers spend considerable time and money trying to insure that the potential gains from any
investment strategy will be worth the risks. So how well does risk management work? And what types work best? Wharton
accounting professor Gavin Cassar and a co-author study the risk management practices of 114 funds in a new paper titled, "How
do Hedge Funds Manage Portfolio Risk?"
'A Major Transformation': The Pros and Cons of the Dodd-Frank Act
According to Wharton experts, the Dodd-Frank Wall Street Reform and Consumer Protection Act is a good start toward future
financial stability, but they warn that significant concerns remain unaddressed, and stress that the details of implementation must
be handled carefully to avoid creating new problems. "I don't think there's a full appreciation of the major transformation of the
financial structure that is upon us," one faculty member says.
Korea's New Central Bank Boss: Finding the Path to Global Financial Stability
South Korean central bank governor Kim Choong Soo is no stranger to controversy. When Lee Myung Bak, the country's president,
called on his former economic adviser to be head of the central bank for a four-year term starting in April, many of the
government's critics cried foul, saying that the appointment of such a close political ally compromises the financial institution's
independence. In an interview with Knowledge@Wharton following his speech at Wharton's recent Global Alumni Forum in Seoul,
Kim discussed his views on central bankers' independence as well as the hotly debated reforms he said the international foreign
reserve system so sorely needs, among other topics.
Private Equity Opportunities in Emerging Markets Could Help Offset a Slow Recovery Elsewhere
While the United States and Europe were hit hard in the global economic crisis, many emerging markets have fared better and
private equity investors may be poised to benefit from new opportunities overseas. But these markets are in different stages of
maturity and each has unique opportunities and potential pitfalls, according to panelists at the recent Wharton Private Equity and
Venture Capital Conference.