Date: Monday 18 June 2007
Time: 6-7.30pm
Venue: Old Theatre, Old Building
Speaker: Professor Jiang Wang
Chair: Professor Dimitri Vayanos

Liquidity is of critical importance to the stability and the efficiency of financial markets. Shortages of liquidity has often been blamed for exacerbating and sustaining financial market crises such as the 1987 stock market crash and the 1998 near collapse of the Long Term Capital Management. Yet there is little consensus about exactly what liquidity is, what determines it, how it affects asset prices and welfare. Views become even more divergent when it comes to appropriate regulations and policies with respect to market liquidity, such as lowering barriers of entry in securities trading, increasing margins and capital requirements of broker-dealers when dealing with hedge funds, coordinating market participants and injecting liquidity during crises. Professor Wang will attempt to present a simple model of market liquidity, which will help consider these issues. In particular, it will help understand what gives rise to the need for liquidity and determines its supply, how liquidity influences asset prices and welfare, and what, if any, policies may help to achieve efficient liquidity supply in the market.

Jiang Wang is Finance Professor at the Sloan School of Management, MIT. Professor Wang is one of the leading financial theorists of his generation. His main work concerns information asymmetries in asset markets and the behaviour of trading volume. In two highly influential papers in the Review of Economic Studies (1993), and the Journal of Political Economy (1994), he solved explicitly dynamic financial-market models where agents are asymmetrically informed. His papers are considered as foundational work and a basis for subsequent theoretical and empirical literature. His recent research (joint with Andrew Lo, MIT) explores empirically the properties of trading volume in the stock market.

This event is free and open to all but pre registration is required. To register please email Accfin@lse.ac.ukor phone 020 7955 7739.

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