Are you ready for some football? Super Bowl and stock returns

Football in New Orleans! No, I am not talking the Saints, the Green Wave, or even LSU. But rather the paper by Fehle, Tsyplakov, and Zdorovtsov that will be presented at the FMA conference in New Orleans.

Short version: Super Bowl advertisers outperform the market by about a half a percentage point on Super Bowl Monday. This increase, which apparently is permanent, is concentrated in heavy

The Stock Market and Political Cycles by John Nofsinger

Our tour of FMA papers continues with The Stock Market and Political Cycles by John Nofsinger.

John Nofsinger examines the historic relationship between who in office and how the stock market does. Contrary to previous papers that used data that went back to only to 1927, Nofsinger reports that for a longer time period (back to 1828!) "The full time-series history reveals that stock market

Does sentiment matter?

Does sentiment matter? By Anchada Charoenrook

Super Short version: Yes!


Slightly longer version:

Sentiment, as measured by the University of Michigan Consumer Sentiment Index, does affect stock prices. Charoenrook finds that “changes in consumer sentiment reliably predict excess stock market returns at one-month and one year horizons.


Long version:

This paper tries to settle the debate

Maybe Fraud is not even needed--Earnings restatements and Management turnover

The Reputational Penalty for Aggressive Accounting: Earnings Restatements and Management Turnover by Desai, Hogan, and Wilkins.
At the same FMA conference session as Jayaraman, Mulford, and Wedge's Accounting fraud and Management turnover, is The Reputational Penalty for Aggressive Accounting: Earnings Restatements and Management Turnover by Desai, Hogan, and Wilkins. This latter paper finds

Accounting fraud leads to higher management turnover--Go figure!

Our trip to the FMA meetings continues with a look at Accounting Fraud and Management Turnover By Jayaraman, Mulford, and Wedge.


Jayaraman, Mulford, and Wedge ask the question “What impact does accounting fraud have on the turnover of top management?” Their answer really should not surprise anyone who has been paying attention in recent years: fraud leads to higher turnover. However, just

Board Size debate continued: Faleye upholds tradition!

A more traditional view of Board size: Smaller is better

A great thing about academic conferences is that you can see multiple sides of most issues (group think is generally not a problem!) For instance at the upcoming FMA meetings Olubunmi Faleye will present a paper that represents the traditional view (at least since Yermack 1996) that smaller is better when it comes to board size. To

Corporate Governance by the Numbers: It Doesn't Work - Knowledge@Wharton Larcker, Tuna, and Richardson

http://knowledge.wharton.upenn.edu/article/1041.cfm: "Another paper that shows that governance is not eaily quantified."



Short Version: Larcker, Tuna, and Richardson provide more more evidence that corporate governance is not easily quantifiable and what works for one firm may not for other firms.

Longer Version:

Consistent with Coles, Daniel, and Naveen, but opposed to what many so-called

Does size matter? An examination of board composition and size by Coles, Daniel, and Naveen

Our trip through the FMA annual meeting at New Orleans continues with a look at a paper on Board Size and Makeup by Jeffrey L. Coles, Naveen D. Daniel, and Lalitha Naveen.

Short Version:

Optimal board composition and board size are a function of firm makeup.


Long Version:

They examine two questions: 1) Is there such a thing as an optimal Board of Directors? and 2) Is board composition firm

Law and Order and the impact of the slave trade

One of the most interesting papers I have read in some time! It really made me think.

Law and Order. No not the TV show. Real law and order. The importance of law in order in a society are often overlooked. This is unfortunate as almost nothing has as far reaching of repercussions. This was again made clear this past week when a friend sent me a link to Brad Delong's Economics blog. While the

Financial Engineering News: Richard Lindsey One on One Interview

Richard Lindsey One on One Interview

Technically this may be more economics oriented, but given that Finance is really just applied economics anyways (and we are financial economists), I am sure you will love this interview. It is with Paul Klemperer.

If the name does not ring a bell, you should know he is one of the world's foremost auction experts. To quote the FEN piece: "Paul Klemperer

And you thought the SEC was tough!?!?!?

The SEC is a pushover in comparison to Chinese regulators.

From Reuters: "China executed four people, including employees of two of its Big Four state banks, for fraud totaling $15 million. "

In some sick, weird, and bizarre way this story is more evidence that selling shares to the public is a means of reducing conflicts that arise from information asymmetries. Apparently these (and other)

Ever worry about sleeping through a test?

Investment Dealers' Digest

You know that feeling? Maybe you have even done it. The fear of over-sleeping and missing an exam or important meeting. Well now imagine you are the head of SunTrust Robinson Humphrey Equity Capital Markets and all of your research analysts missed the test and therefore can not issue research!

Let's go back and see how this happened! In an attempt to prevent further

Stanley looks at CEO pay when other CEOs are on the Compensation Committee

The basic question that is being asked is "Does having CEOs of other firms on your compensation committee impact CEO pay at your firm?"

As author Brooke Stanley puts it: "Since the compensation of any given CEO is a function of the compensation of his peers, when one CEO serves on another's Compensation Committee, he has an opportunity to indirectly influence his own compensation by

Teaching Kids about Money: Why It's Not Just Fun and Games - Knowledge@Wharton

Teaching Kids about Money: Why It's Not Just Fun and Games - Knowledge@Wharton

We all know that finance is important not just for our business lives, but also personal lives. Yet with millions of people living paycheck to paycheck and facing mounting debts, even a quick look around leads many (Alan Greenspan among them) to conclude that many people do not understand finance.

While it is

Executive Compensation and the Bills loss, What do they have in common?

What a tough loss for the Buffalo Bills this week. The key play was a 45 yard pass from Brian Leftwich to Jimmy Smith on 4th and 14 for the Jacquars. Had the ball dropped incomplete, the Bills could have run out the clock and gone home with a win.

But no, the pass was caught and the Bills ended up losing the game on the last play of the game (a walk-off touch down).

At the time I thought, "ARGH

Vote for Fama and Jensen for Nobel Prize ;)

A reader (Subscriber? What do you call someone who reads a blog?) just sent me a link to http://www.argmax.com/mt_blog/. I really am impressed with the site (although not with its name). It is one of the best Economic Blogs I have seen!

And when you are there, why not vote for some Finance people to the survey as to who will win the Nobel Prize. I think both Fama and Jensen are perfectly

Opler, Damodaran, Copeland, and other experts on valuation

FMA Online, Spring, 2004

It really doesn't get much better than this! Tim Opler, Aswath Damodaran, and Tom Copeland speaking on valuation. The presentations (video, powerpoint, and documents) are from last year's FMA conference in Denver.

The real short version of the presentations is that while Discounted Cash Flow Analysis (DCF) is the theoretically correct way to value a firm, most

Stock crashes when CEO flies

CEO plane usage linked to declining stock value.


Short version: David Yermack shows that when CEOs get personal use of corporate airplanes, the firm's stock underperforms "market benchmarks." This underperformance is consistent with a view that the plane usage is symptomatic if a greater agency cost problem.

Longer version:

Perquisite consumption (a fancy way of saying that managers have

3 years already? A look back...FRB: Testimony, Olson--Protecting the financial infrastructure--September 8, 2004

FRB: Testimony, Olson--Protecting the financial infrastructure--September 8, 2004

Can you believe it has been three years since the tragic events of 9-11-2001? You remember where you were and what you were doing. You remember who you watched the drama unfold with. You remember the panic-filled phone calls from friends in NYC or DC, the emails, the fear, the sadness. We all do.

At today's

SSRN-Reappearing Dividends by David Ikenberry, Brandon Julio

SSRN-Reappearing Dividends by David Ikenberry, Brandon Julio


If you teach finance, there is a good chance that you have been teaching that dividends are disappearing. This teaching no doubt flows from Fama's and French's 2001 paper that reported firms were cutting back on their dividend payments.

Well, NOT SO FAST! They're Back!! Or at least maybe they're coming back. That is the conclusion of

Non finance stuff

Sorry about the lack of posts this last week. With classes starting and working on three or four different papers, I have just run out of time. Hopefully it will all calm down soon. Maybe I can review a paper tonight.

Ristening update:

Absolutely love Grant Comes East by Newt Gingrich and William Forstchen. I LOVE IT!!! It is an alternative history version of the US Civil War. It is so