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The Securities and Exchange Commission in America has called for stress tests of asset managers to ensure they can muddle through a crisis.
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Two decades later, Shiller showed that there is more predictability in the long run in stock and bond markets, while Hansen developed a statistical method to test theories of asset pricing.
Not only does this relationship hold for stocks, but for other assets such as bonds too.Mr Hansen, a macroeconomist at the University of Chicago, also shared the prize for his development of statistical methods to test theories of asset pricing on empirical data.
After the crisis, FASB considered forcing banks, and others who hold loans and debt securities on their balance-sheets, to book all those assets at market rates (so-called mark-to-market accounting).Purists love mark-to-market: there is no better test of an asset's worth than what it would sell for.
Lars Peter Hansen developed a statistical method that is particularly well suited to testing rational theories of asset pricing.
If this fuzziness is not enough to spook investors, the other component of the test, the checking of asset values, may well be.
The centerpiece of this is the so-called liquidity coverage ratio, which tests the quantity of assets a lender holds to withstand 30 days of investors pulling money in a stress situation partly modeled on the financial crisis.
The first round of tests was based on self-reported data of asset quality and loss estimates.
Expenses run 1.24% of assets annually.
However, such a test would be difficult given the quality of asset data.
Costs paid for preparation of asset installation.
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CEO of Professional Science Editing for Scientists @ prosciediting.com