Some context for this week’s coronavirus panic and financial market correction:
A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques (New York: Henry Holt and Company, 2017). What happened on Monday, October 19, 1987, and what led to it.
A Demon of Our Own Design: Markets, Hedge Funds and the Perils of Financial Innovation (Hoboken, NJ: John Wiley & Sons, 2008). A leading quantitative portfolio manager notes two causes of the 2008-09 Great Recession or Global Financial Crisis: the use of leverage, and the rapid growth in complex financial assets (such as mortgage debt securities and collateralised debt obligations).
Manias, Panics and Crashes: A History of Financial Crises (Seventh edition) by Robert Z. Aliber and Charles P. Kindleberger (New York: Palgrave Macmillan, 2017). An influential history of why manias, panics and economic crashes occur.
Market Madness: A Century of Oil Panics, Crises, and Crashes by Blake C. Clayton (Oxford: Oxford University Press, 2015). A behavioural economics view of why oil panices, crises, and crashes occur – building on Robert J. Shiller’s pioneering framework.
The Asylum: Inside The Rise and Ruin of the Global Oil Market by Leah McGrath Goodman (New York: HarperCollins, 2011). How traders and speculators deal with the global oil market and risk-reward decision-making.
Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos by James Rickards (New York: Penguin, 2019). One of the best well-argued bear cases for a financial crisis or recession in the near future.
World Event Trading: How to Analyze and Profit from Today’s Headlines by Andrew Busch (Hoboken, NJ: John Wiley & Sons, 2009). How event arbitrage traders trade economic crises, pandemics, geopolitical conflict, and other forms of volatility events: they look for tradable catalysts.
The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the Financial Order of Decaying Growth and Economic Crisis by Tim Lee, Jamie Lee, and Kevin Coldiron (New York: McGraw-Hill, 2019). How volatility suppression strategies can create the market conditions for volatility events.
Narrative Economics: How Stories Go Viral & Drive Major Economic Events by Robert J. Shiller (Princeton, NJ: Princeton University Press, 2019). A behavioural economics perspective on the role of narratives in creating and shaping volatility events.
Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo (Princeton, NJ: Princeton University Press, 2019). An influential quantitative finance researcher and quantitative hedge fund consultant outlines his Adaptive Markets Hypothesis – and how it differs from the Efficient Markets Hypothesis.
During my 2002-04 Masters studies in strategic foresight at Swinburne University, I also wrote a postmortem on the 2000 Dotcom Crash.