Wall Street

It’s no wonder that public confidence has sunk to an all-time low with so many financial scandals and so many of them self-inflicted, said Ann Buchholtz, a professor of leadership and ethics at Rutgers University in New Jersey.

“This is a case of heroes doing more harm than good,” Buchholtz said. Investors tend to romanticize corporate leaders and attribute success within an organization to them when the drivers of that performance are far more complex, she said. “We tend to make them bulletproof, looking the other way when we see signs of problems. We don’t believe ill of a leader until the evidence is overwhelming.”

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Knowing that diehards will see the movie out of loyalty to the book series helped Lionsgate keep its marketing budget at $45 million. John Longo, who teaches stock valuation and market psychology at Rutgers Business School, said the hype has made an impression on Wall Street, too. Lionsgate Entertainment Group’s stock price soared to a 52-week high as the studio shows signs of reaping big rewards with its newest franchise. Yesterday the stock closed trading for $14.55, up nearly 90 percent this year.

The best thing to be said of the recent stomach-churning turmoil on Wall Street is that it’s taking place in August, a time of year when many people are lounging at the beach or camping in the woods and not paying attention to stocks. But for everyone else not on a ‘stockation,’ watching the markets rise and fall like giant ocean swells has been an unnerving experience that some finance professionals worry could reshape investor behaviour for months and years to come.

“There’s a different dynamic now because of the pervasiveness of high-frequency traders and hedge funds,” says John Longo, chief investment strategist at MDE Group, which manages USD 1.3 billion in assets. Longo, also a finance professor at Rutgers Business School in New Jersey, adds: “The down-5% one day, up-5% the next day volatility wouldn’t have happened in the past.”

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The protection of retailers is arguably the SEC's top priority, which helps explain why the government agency has allowed pay for flow to thrive. Yet the health of the overall market -- another key SEC mandate -- has sparked worries. An April study by Rutgers University finance professor Daniel Weaver found "strong" evidence that off-exchange trading reduces market quality, bringing wider bid-ask spreads and higher volatility to the displayed or "lit" marketplace.