Blog 5

This week I chose to watch the movie Wall Street: Money Never Sleeps. This 2010 movie is a sequel the Wall Street, the 1987 film. This movie talks about the financial crisis that happened in 2008. While this is a fiction, it has made me understand more about the working life in investment banks and the greed of bankers in the financial world. Following a documentary about the collapse of the Lehman Brothers about 3 weeks ago, this movie has a little similarity at the beginning where Keller Zabel Investments (KZI) faces loss during the 2008 financial crisis and is forced to arrange a bailout with other Wall Street banks. While KZI is facing bankruptcy, Bretten James of Churchill Schwartz saw the opportunity to make money by buying out the company’s shares at a very much cheaper price compared to what they were trading for before this. This shows that instead of helping each other out, the bankers are actually trying to benefit from the downfall of one another on Wall Street. The downfall of the company also meant that all of the employees have lost their jobs.

Later on, Gordon Gekko, the man who went to jail for insider trading and fraud revealed that the collapse of KZI was due to rumours about toxic debt that the company has being spread around. This reminds me about the lecture topic a few weeks ago about the stock market and the efficiency of it. It is basically how the public react to information that are being circulated or spread. Initially, I did not see how the theories I learned in class could be applied to real life scenario but this movie opened my eyes and after reading about the lectures again, I could see it being applied. A hypothesis called efficient market hypothesis (EMH) suggests that prices of stocks fully reflect on available information that are related to them. There are 3 degree of efficiencies which are strong efficiency, semi-strong efficiency and weak efficiency. In my opinion, there is no absolute one definite form of efficiency in any given market. With the improved technology we have now, information are being spread every second but are the information legit?

Having watched this movie has improved my understanding of how stock market efficiency can be applied to the real world. However these are just my thoughts and opinions and may be wrong. I would definitely love to learn more about this when I am older and can therefore take this into practice by working in an investment bank or just by trading stocks and see how this can be applied.