Why understanding history is important?

"As a protection against financial illusion or insanity, memory is far better than law. When the memory of the 1929 disaster failed, law and regulation no longer sufficed. For protecting people from the cupidity of others and their own, history is highly utilitarian. It sustains memory and memory serves the same purpose as the SEC, and, on the record, is far more effective.” – John Kenneth Galbraith

When Jeremy Grantham was asked, “Do you think we will learn anything from this turmoil?” He responded, “We will learn an enormous amount in the very short term, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent.”

Analysis of various recessions / downturns

Episodes studied (These six have been chosen for the differences in them):

The great depression (1929-1939)

•     1. Economic terminology: Definitions of certain economic terms like recession, depression, market crash, downturn, etc.
•     2. Economic cycles

The securities scam in India (1992)

•     1. The flaws in the banking system that were exploited
•     2. Risk of physical certificates
•     3. Transparency in the security markets – evolution over the years

The Asian contagion and the fall of Long Term Capital Management (1998)

•     1. Capital flows and the contagion effect – introduction to decoupling
•     2. Understanding role of leverage
•     3. (Il)liquidity and its impact
•     4. Black swan – a six-sigma event

Dot-com bust (2000-2001)

•     1. Valuation of stocks
•     2. Mania
•     3. The Indian angle – the difference between Indian technology companies and the Dot Com companies

Subprime crisis (2007-2009)

•     1. Risk of risk measurement
•     2. Problem with lack of transparency
•   3. Understanding derivative products – difference between OTC and exchange traded derivatives
•     4. Decoupling revisited
•     5. The Indian angle – why India came unscathed

The observations

The common themes

•     1. In spite of the differences between various episodes, there has been a common thread – a common pattern

Drawing parallels between various episodes

•     1. This section compares parallels between various episodes

Anatomy of a crash

• How does the whole market crash happen?
• Is it possible to identify a crash in advance?

Lessons from financial market crisis

What can we learn out of the history?

Investor behaviour in times of crisis: Some behavioural finance concepts and the common mistakes made by investors

Advisor behaviour: The mistakes that the advisors make at times – especially at turning points

Structural and regulatory controls

How to safeguard one's portfolio

Participants attending the entire course shall be eligible to receive Participation Certificate from the BSE Institute Ltd.