The ruinous but not yet concluded affair of the four small banks has led many commentators to call for greater transparency on the financial markets. Transparency would therefore be the necessary and sufficient condition for savers to be able to make informed choices on the combinations of risk and return on the investment they are about to make. The succession of the most ruinous financial events has contributed to deeming the legislation on the financial markets inadequate, aimed precisely at guaranteeing that the investor is correctly and fully informed.
In order not to think only about an indistinct set of financial markets, it should be noted that the expression "transparency of financial markets" must refer to at least two distinct markets: the primary one and the secondary one which, although closely intertwined, require different regulations . The first requires transparency rules aimed at informing the market about the issuer's balance sheet and in particular about the conduct and strategies of its directors.
The second requires that the information mainly concern the nature, the balance sheet and the behavior of the financial intermediary who negotiates the securities issued by the issuer, above all to prevent conflicts of interest in the event that the intermediary is also an operator multifunctional, as usually happens, and not just a pure broker. In any case, for both markets, as it is written in well-ordered finance handbooks, the saver is always supposed to be rational in his choices.
The paradigm of rationality of the well-informed investor also underlies the preparation of supervisory regulations… It is a legacy of neo-classical economics which considered itself not a simple discipline in the field of human sciences, but a discipline on a par with physics and mathematics to be apply to society and to the choices of economic operators. What is the rationale of HFT, Hight Frequency Trading, remains a mystery to me.
The studies of neuro-economics and behavioral finance (for all see I essays by S. della Vigna, Psychology and Economics: Evidence from the Field, Journal of Economic Literature 2009, 47:2, 315–372; M. Rabin, A perspective on psychology and economics. Alfred Marshall Lecture, European Economic Review 46 (2002) 657 - 685.), notoriously dispute the neoclassical paradigm of the rationality of individual choices and instead believe, with a different paradigm, that the behavior of savers is due, for example, but without claiming to be complete, to: a) the "herd" effect, otherwise known as the guru effect, whereby the investor, conforming to the opinions, often exalted in the press, of the majority of operators or financial analysts or of large investors, follows short-term trends characterized by high price volatility; b) the rumor effect, ie one buys following the rumors (uncertain and only probable events) on the market and sells when the actual news is given to the market; c) the anchoring effect, ie it is hypothesized that the performance of the securities may be linked to past events (the so-called "anchoring") which condition the rationality of subsequent choices; d) the emotion effect, whereby decisions are made on an emotional level and therefore tendentially irrational, or based on cognitive prejudices; e) the announcement effect whereby they assume behavior based on the hypothesis according to which market prices move not on the basis of the fundamental data of the companies, but on the basis of the deviation of these data from the supposedly rational expectations.
The same studies have also highlighted that many entrepreneurs and managers are afflicted at least by: a) overconfidence, which leads them to underestimate market, company, counterparty risks and so on; b) errors for the decisions adopted with reference to statistical samples that are not representative of the universe and therefore the events considered are arranged on the thin tails of the probabilistic distributions: thus the probability of success is overestimated; c) unwillingness and arrogance not to reconsider decisions taken in the past whose failure is attributed to external factors and not to mistakes made on one's own.
In conclusion, if the above were even only partially plausible, the most recent events in the financial markets that discount the rationality underlying supervision, the information presented in the information prospectuses and the investor's presumption of rationality bring to mind the famous aphorism of Peter Metastasio: even the transparency of finance and the rationality of choices are like the Arab phoenix “that there is, everyone says so; where he is, no one knows."
