Financial Bubble
National Chengchi University
Department of Finance
ETP Graduate Investments
Fall 2010
Case Discussion Questions
Instructor: Professor Edward H. Chow 周行一
Case study: financial bubble
Case: Trouble with a bubble (9-808-067)
1. Why did Irving Fisher believe that stock prices had reached a permanently high plateau?
2. Why did the stock market crash in 1929?
3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary?
Case study: investment banking business and global financial crisis
Case: Investment banking in 2008 (A): Rise and fall of the Bear (KEL378)
1. What role did Bear’s culture play in its positioning vis-à-vis its competitors, and what role might that culture have played in its demise?
2. 2. How did Bear’s potential collapse differ from that of LTCM in the eyes of the Federal Reserve?
3. What would Bear have done differently to avoid its fate?
a. - In the early 2000s?
b. - During the summer of 2007?
c. - During the week of March 10, 2008?
4. Who stood to benefit from Bear’s implosion?
5. Is market perception of liquidity more important for an investment bank than it is for an traditional manufacturing or distribution business? If so, why?
6. How could Bear have addressed perceptions of its liquidity? Could it have stopped the run on the bank, and if so, how?
7. Did Bear’s failure undermine the viability of so called “pure-play” investment banks?
8. What role should the Fed play in maintaining order in world securities markets? Case: Investment banking in 2008 (B): A brave new world (KEL380)
1. Why were proponents of deregulation so successful in the late 1990s? How much can we blame deregulation for the meltdown in the investment banking industry? And how could the government have foreseen and/or stopped the domino effect before the crisis of 2008? 2. Could any one of the investment banks have remained competitive without following the
Department of Finance
ETP Graduate Investments
Fall 2010
Case Discussion Questions
Instructor: Professor Edward H. Chow 周行一
Case study: financial bubble
Case: Trouble with a bubble (9-808-067)
1. Why did Irving Fisher believe that stock prices had reached a permanently high plateau?
2. Why did the stock market crash in 1929?
3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary?
Case study: investment banking business and global financial crisis
Case: Investment banking in 2008 (A): Rise and fall of the Bear (KEL378)
1. What role did Bear’s culture play in its positioning vis-à-vis its competitors, and what role might that culture have played in its demise?
2. 2. How did Bear’s potential collapse differ from that of LTCM in the eyes of the Federal Reserve?
3. What would Bear have done differently to avoid its fate?
a. - In the early 2000s?
b. - During the summer of 2007?
c. - During the week of March 10, 2008?
4. Who stood to benefit from Bear’s implosion?
5. Is market perception of liquidity more important for an investment bank than it is for an traditional manufacturing or distribution business? If so, why?
6. How could Bear have addressed perceptions of its liquidity? Could it have stopped the run on the bank, and if so, how?
7. Did Bear’s failure undermine the viability of so called “pure-play” investment banks?
8. What role should the Fed play in maintaining order in world securities markets? Case: Investment banking in 2008 (B): A brave new world (KEL380)
1. Why were proponents of deregulation so successful in the late 1990s? How much can we blame deregulation for the meltdown in the investment banking industry? And how could the government have foreseen and/or stopped the domino effect before the crisis of 2008? 2. Could any one of the investment banks have remained competitive without following the