Current courses
Ethics in Finance: FRS 149 – Jack Laporte Jr. ’67/Burton G. Malkiel ’64 Freshman Seminar (Fall 2023)
Examples of ethical transgressions in the finance industry continue to abound, despite the slew of high-profile scandals exposed over the past two decades. The global financial crisis arguably highlighted the extent to which we seem to have made little progress in stamping out unethical behavior in markets. This seminar will explore ethics in finance using a case-based method. Our approach will be grounded on an understanding of the role of a financial system in an economy and society. We will frame the discussion by reviewing the economic development and egalitarian arguments in favor of markets and considering their limits. We will address the seminar's topic from various angles, drawing on financial theory and concepts of behavioral ethics, corporate governance, economic development, and public policy.
In addressing ethical issues, a few themes will be particularly emphasized throughout the semester:
- A discussion of the underlying assumptions of finance theory, their impact on the practice of finance and on the practical role of morality in the industry, and the applicability of Kantian, Utilitarian, and Virtue Ethics philosophies to finance.
- An attempt to distinguish ethical issues that are systemic in nature from those that relate to individual decision-making and character.
- For the systemic issues, an overview of how the largest financial firms on Wall Street have evolved over the past several decades from private partnerships to publicly-listed companies, creating new conflicts of interests, and the potential impact of that trend on inequality.
- A comparison of corporate governance across national financial markets, with particular emphasis on the United States, China, Japan, and India, and how the typical conflicts of interest encountered in each of these countries might be linked to the nature of their financial systems.
- For the issues related to individual decision-making, case studies to illustrate various patterns observed in markets, from outright deceit, fraud, and manipulation to more nuanced mishandling of conflicts of interest. For the latter, we will pay particular attention to the concept of “bounded ethicality” and the grey areas in which financial actors have to balance a complex web of duties and incentives. Many of these discussions will center on the conflicts that arise from agent-principal relations such as corporate executives acting on behalf of shareholders and investment managers acting on behalf of clients.
- A discussion of role models – finance professionals that pursue their self interest in a responsible manner, in ways that seek to benefit society rather than extract value from it. Some of these role models will participate in the seminar to discuss specific decisions they made that are at odds with the path taken by their peers.
- An exploration of the economic and social value of investments and which types of investments might create most positive impact beyond financial returns.
This seminar is targeted at a broad group of students, including students who have an interest in finance from an investment, economic development, or public policy perspective, and those who have an interest in concepts of moral reasoning applied to finance. There are no specific prerequisites for the class, although having taken introductory economics will help.
The course will feature several guest speakers, including a regulator and finance practitioners, who will provide a personal perspective on conflicts of interest encountered in the finance industry. (Thursday 1:30-4:20 p.m.)
Asian Capital Markets: ECO 492/FIN 592 (Spring 2024)
The combination of fast economic growth and, in many Asian countries, deregulation of capital markets, has resulted in the rapid growth of Asian capital markets. This course will explore the increasing weight of Asia in global financial markets and its implications. It will also address China’s gradual shift toward a capital market-based financial system and the prospects for the development of the renminbi into an international currency. We will frame the discussion in the context of the globalization of financial markets and will consider the growth of Asian capital markets from the perspective of economic development, domestic institutional reform, and public and private market investments. We will also explicitly consider the policy decisions faced by the Chinese and US governments relative to existing global macro-economic imbalances and trade tensions. Discussions will combine an analysis of historical trends and of the most recent data and events with insights from practical experience in Asian capital markets. While the course will review examples across Asia, it will focus on China and Japan, the most influential markets in Asia.
Major questions to be addressed during the course of the semester include:
- How have capital flows to Asia evolved over time?
- How have the capital markets of China, India, and Japan developed over time?
- How efficient are these markets? What are linkages with economic development?
- What are the drivers of the existing global macro-economic imbalances, and particularly China-US imbalances? How do they affect capital markets?
- What are the implications of rising US-China trade and geo-political tensions?
- How do patterns of corporate governance in Asia affect capital markets?
- How do investors such as hedge funds and private equity funds approach investments in Asia? What have been drivers of equity market performance?
- To what extent are Asian capital markets challenging the pre-eminence of New York and London as global financial hubs?
- What are prospects for the continued development of Asian markets and for further integration of global capital markets?
- What are the prospects for the development of the renminbi into a major international currency? Into a major reserve currency?
(Thursday 1:30-4:20pm)