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The Bankruptcy of the Securities Market Paradigm
Virginia Law and Business Review (2015)
  • Stephen P Wink
The current paradigm of securities market regulation in the United States rests on the Efficient Market Hypothesis, a theory that has been largely discredited by modern economics and behavioral finance. The Efficient Market Hypothesis assumes that the price of securities in the market accurately incorporates and reflects all available material information. Building on this notion, regulators have assumed that better information leads to healthier markets—and therefore regulation that enhances disclosure and transparency leads to healthier markets. Over time, this reasoning has elevated these tools, disclosure and transparency, to ends in themselves, despite the flaws in the Efficient Market Hypothesis. Although the current paradigm is obsolete, a new paradigm has yet to take its place. As a result, regulators do not have effective guiding principles when engaging in rulemaking, leading to needless complexity and inefficiency. The author proposes a broad effort to explore the parameters of a new paradigm and provides several potential starting points for discussion and progress. The truisms of regulation, such as the value of transparency and disclosure, should be reconsidered—not necessarily abandoned, but examined to ensure that we are using them most effectively in support of our securities markets.
  • Securities market,
  • efficient market,
  • regulation,
  • transparency,
  • disclosure,
  • integrated disclosure system
Publication Date
Spring 2015
Citation Information
Stephen P Wink. "The Bankruptcy of the Securities Market Paradigm" Virginia Law and Business Review Vol. 9 Iss. 3 (2015)
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