Perspectives: The Possible Misdiagnosis of a Crisis

Posted: 12 Apr 2011

See all articles by Richard Roll

Richard Roll

California Institute of Technology

Date Written: April 11, 2011

Abstract

Most explanations of the 2007-08 financial crisis - including excessive leverage, subprime mortgages, exotic derivatives, reckless risk taking, and easy money that spawned a housing bubble - are inconsistent with elementary principles of finance. The author explains the inconsistencies and suggests an alternative diagnosis that is fully compatible with rationality.

Keywords: Economics, Aggregate Demand and Aggregate Supply, Fiscal Policy, Macroeconomics of an Open Economy

Suggested Citation

Roll, Richard W., Perspectives: The Possible Misdiagnosis of a Crisis (April 11, 2011). Financial Analysts Journal, Vol. 67, No. 2, 2011, Available at SSRN: https://ssrn.com/abstract=1807239

Richard W. Roll (Contact Author)

California Institute of Technology ( email )

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