The London School of Economic’s Financial Markets Group has launched the Paul Woolley Centre for the Study of Capital Market Dysfunctionality, following the donation by the former Baring Brothers director of £4m over six years.

The centre’s director will be finance professor Dimitri Vayanos, who joined LSE from MIT’s Sloan school in 2004. Mr Woolley will be chairman of the centre’s advisory board as well as a full-time member of the research team.

The Woolley centre will aim to understand the workings of capital markets and the social efficiency of the allocations that these markets achieve. Research at the centre will focus on three areas: an understanding of the causes of market dysfunctionality; an evaluation of the consequences of dysfunctionality; and the proposal of policy remedies so that the financial sector can better serve society at large.

“Recent episodes in global financial markets have highlighted the need for new research on the functioning and potential failure of financial markets in allocating capital,” says David Webb, director of the Financial Markets Group at LSE. “The new centre promises an original and challenging research agenda that will deepen our understanding of a host of fundamentally important questions.”

The centre will run conferences, seminars, a visitors’ programme and research scholarships in addition to the publication of a series of papers.

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