The Information Risk in the Latest Crisis: a Driver or a Driven Factor for Global Financial Markets Equilibrium?

The latest financial crisis has been impressive for strength, impact, duration, and reduced efficacy of the economic and financial policies adopted by the authorities. We use an original information risk model to contribute to the analysis of the crisis and to suggest some approaches for a possible early diagnosis. Using data referred to the three main financial markets and comparing the latest crisis with the previous one and with long-term quantitative evidence, we find out that the 2007-2009 crisis was very different in the information risk quality. That gap affected the market risk aversion and its equilibrium, reducing the efficacy of the authorities ’ intervention tools mainly based on payoff risk control and efficient market restoration. Since information risk is an endogenous element of the market dynamics that can be independent form contingent levels of market efficiency. Drivers of information risk in the European Markets differed strongly from the US and Japanese ones; that is why some global decisions had low impact while opportunities of local intervention were missed.