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Implications for Decision Theory, Enforcement, Financial Stability and Systemic Risk

  • Michael I. C. Nwogugu
Chapter

Abstract

Some of the problems inherent in the structure of Financial Indices, ETFs and Index Funds were discussed in earlier chapters in this book—and the large size of the Global Index Products Market amplifies these problems. Another dimension is that the Social Welfare problems of Indexing can have wide-ranging negative “Multiplier Effects” (on households, companies and government agencies) and which have not been addressed by index sponsors, fund sponsors or regulators. This chapter: (i) discusses the implications of ETFs, Indices and Index Funds for enforcement, Sustainability, Inequality and financial stability; (ii) discusses “path-dependence” and “Lock-ins” and proposes new models of government intervention; and (iii) proposes new sustainability measures that are designed to reduce the wide-ranging adverse effects of Indices, Index Funds and ETFs (such as Destructive Urbanization, Inequality, Pollution and Climate Change, harmful Arbitrage, and Costly Technological Change).

Keywords

Decision theory Enforcement Inequality Sustainability Path dependence Social welfare Nonlinear financial instability Nonlinear systemic risk Government interventions Capital re-allocation 

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Authors and Affiliations

  • Michael I. C. Nwogugu
    • 1
  1. 1.EnuguNigeria

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