The European Securities and Markets Authority said in a statement that short sales—negative bets on stocks—would be curtailed in France, Belgium, Italy, and Spain. Andrew Lo says that it is impossible to know whether the panic of 2008 would have been worse without the ban, but general studies of short-selling have found that bans on that activity can lead to more volatility in the market and lower trading volume.
With consumer spending already declining in recent months, economics say the plunge in the stock markets over the past month could deal another significant blow to Americans' spending habits—a threat that could imperil any meaningful economic recovery. MIT Sloan Professor, Andrew Lo says: "That kind of perception of a loss in wealth is going to make people more frugal, more reluctant to spend—and that's exactly the wrong direction for the economy to go."
As investors adjusted to a new world in which the United States government doesn't have a perfect credit rating, stocks suffered one of the worst sell-offs in history Monday, and a fresh recession seems increasingly possible. Professor Andrew Lo says: "American voters are going to realize that the political impasse has consequences that will hit them in the pocketbook."
In an unprecedented and historic move, Standard & Poor's downgraded U.S. Treasury securities one category from AAA to AA+. Experts are increasingly worried that the American economy is headed back into recession. MIT Sloan Professor, Andrew Lo says "This is the worst thing to have happened, given the weak economy we already have."
Hedge funds are facing increased obstacles, of which the regulatory requirements are just one. MIT Sloan Professor Andrew Lo says "weighed against the economic value hedge funds arguably create through the more efficient allocation of capital, must also be set the systemic risks which their herdlike and short-termist behaviour create."
For municipalities struggling to get their finances in order and for the professionals who oversee their investments, the battle being waged in Washington over the federal debt ceiling has become an urgent source of worry. MIT Sloan Professor Andrew Lo provides his input, saying "Any time you have any kind of coordinated divestiture, there's alwasy the risk of a panic and a bank run, but instead of a run on a bank, it's going to be a run on money market funds."
In this article, the question posed is "are hedge funds good for you?". MIT Sloan professor, Andrew Lo says: "Hedge funds are the tip of the spear when it comes to new investment opportunities. They are also the canary in the coal mine when things start to break down."