Greenbaum on Corporate Governance

Stuart Greenbaum recently gave a very interesting and important speech at the Financial Intermediation Research Society Meetings in Shanghai China. Fortunately for those of who did not go to China to attend the conference, the keynote address is available through SSRN. The abstract does not do the speech justice, so I will provide some "visual bites" via some "look-ins":*"Ben Hermalin and

Market overreaction or hedging?

First off, let me state that I am a huge fan of markets. I think they are fairly semi-strong form efficient (not perfectly so), but can get caught up a bit with fads, etc. Inactive markets are particularly prone to such mispricing since there are not enough "arbitragers" (And here I am using Thaler's view that is not necessarily a risk free arbitrage) to "fix" items that are priced incorrectly.

Out of sample tests

I am a big fan of so called "out of sample" tests. When researchers find some anomaly within a data set and then others test for the presence in the same data set, we really do not learn much if they find the same thing. But when a new data set is used for the test, we have a much better understanding of the possible anomaly.In the current JFQA there is just such an article by Richard Grossman

Around the blog world

A few quick looks at really interesting articles from various blogs:FreeMoneyFinance comments that a good way to save money is to avoid going shopping. I could not agree more!!!"If you want to save money, don't go to any store to just pass time. You'll most certainly spend more than you would if you hadn't gone. Instead, take a walk, go to the park or visit a free museum. You'll not only save

Buffett to give away Billions

Wow!Major kudos to Warren Buffett!From Fortune:"Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett's (a connection that began in 1991, when a mutual friend introduced

Corporate diversification may not be such a bad thing afterall

SUPER SHORT VERSION: If facing expropriation, managers may maximize shareholder wealth by diversifying their firm.Corporate Diversification is badThe standard line for the past 20 years has been that corporate diversification is bad for shareholders. We have seen this in the diversification discount work of Comment and Jarrell (1995) and many other papers (for instance Megginson, Morgan, and

Addicted to learning?

Ok, so this is not strictly finance, it is very interesting and would probably explain my ADhD. LOL..From Science Daily:"The "click" of comprehension triggers a biochemical cascade that rewards the brain with a shot of natural opium-like substances, said Irving Biederman of the University of Southern California. He presents his theory in an invited article in the latest issue of American

Are you one of nearly 9 million?

It is estimated that there are approximately nine million (9,000,000) millionaires worldwide.From SeattlePi""....the ranks of world millionaires had swelled to 8.7 million last year _ half a million more than the population of New York City. Millionaires also invested more aggressively, pouring cash into emerging markets and pulling it out of fixed income holdings, as their wealth reached $33.3

SSRN interview with PrawfsBlawg via Financial Rounds

Since I get so much material from them, giving SSRN a plug is the least I can do. Prawfsblog has an interesting interview with Gregg Gordon of SSRN. Probably interesting mainly to academics, but....On look-in:"SSRN was founded in 1994 by Michael Jensen and Wayne Marr to provide an efficient means to distribute scholarly research. Our motto, Tomorrow’s Research Today, drives what we do every

Equity in Iraq? Or any country for that matter

Ok, just thinking aloud here which is always dangerous, but....Iraq needs money to rebuild infrastructure, security, etc. Buta. can not afford to borrow that muchb. as an Islamic nation, the borrowing may be problematic on religious groundsSo, why not sell non-voting equity? Make the payoff some function of future GDP (or even include some lower payoff if violence is high). Then sell these

Don't count your chickens until they are hatched

You know the sayings: "Don''t count your chickens until they are hatched" and "it's not over until the fat lady sings." Well, it now appears the NYSE may give us yet another example of why it is wise to remember the end is not the end until it is over.From today's NY Times DealBook:"A trans-Atlantic deal that looked like a strategic coup for the newly public NYSE Group — its proposed

Two stories on Islamic Finance

Two interesting Islamic finance articles:First on the growth of Islamic finance. From the BBC:"The dramatic growth of Islamic banking and finance appeared to have been confirmed during the recent World Economic Forum in Sharm al-Sheikh in Egypt. One of Germany's biggest banks, Deutsche Bank, announced a joint venture with Ithmaar Bank of Bahrain and Abraaj Capital of Dubai to launch a $2bn (

Interesting look at MBAs

Is an MBA worth it? The NY Times reports on an interesting look at this question. (NOTE: it does not prove anything and is not scientific, but it is interesting!)"The popularity of the degrees has surged. In 1970, for example, business schools handed out 26,490 M.B.A.'s, according to the Department of Education. By 2004, after a period marked by an economic boom and heightened competition for

A skeptical Appraisal of Asset-Pricing Tests

Not the best of news in this one. In fact it is sort of discouraging.Lewellen, Nagel, and Shaken give us a Skeptical Appraisal of Asset-Pricing TestsShort version: we really do not have much of an idea as to what asset pricing model is correct and to make matters worse existing tests may not be showing what we think they do.Longer view:A few quick views in the authors' words:"The finance

What do bank examiners examine?

I have to confess, having never worked in a bank when I teach a banking class I have to rely on text book explanations. So it was with great interest that I read Fed Governor Olson's comments on "What are examiners looking for when they examine banks for compliance?" .Some looks-ins:"To assist you in your efforts to fine-tune your compliance-risk management programs, I'd like to give

Milken Institute Audio

Wow. I may never turn the computer off ;) Audio presentations from the Milken Institute. These are really interesting. On everything from the economic impact of terrorism to globalization to education to civil liberties to medicine. I have a feeling if Ben Franklin or Thomas Jefferson were around today, this is what they would be listening to!Oh yeah, video clips are also available.

Video of Bogle's speech on the Mutual Fund Industry

I finally got around to watching Bogle's speech to Independent Mutual Fund Directors. It is available on the Bogle eblog.My favorite quotes:"...the more mangers take, the less investors make.""If you do not believe we are we are in teh marketing business, consider rate of fund failure....there have been 30,000 funds in history, 11,000 of them are gone....Even in the last 5 years, 25%, actually

Interesting Searches

I have been meaning take a look back at some interesting articles previously blogged for a while and I guess a quiet Friday is as good of time as any.This is made MUCH easier with the blogspot search feature (top of blog) which is finally working correctly. For instance, a quick search of IPOs yields a look back on 10 articles that have been blogged over the past year. Some of the articles are

Retirement woes

Many are not saving enough for retirement. Shock!From CNNMoney.com:"NEW YORK (CNNMoney.com) – A new retirement risk index released Tuesdayestimates that 43 percent of working-age households are not likely to haveenough retirement income to replicate their current standard of living.The Center for Retirement Research (CRR) at Boston College created the index and defines "at risk" to mean those

A SUPER quick look at international covariances

Shorter than short version: International return correlations may NOT be increasing as much as we thought!This has to be short as I have meetings all afternoon. In fact it was in preparing for the meeting (essentially pension planning for a local religious community), that I stumbled upon the following. I do not have time to give it a complete "review" but it flies in the face of conventional

Why has CEO pay Increased so much?

Gabaix and Landier ask “Why CEO pay has increased so much?”.Their answer: firms have gotten much larger. Slightly longer version: Has CEO pay increased because of friendly boards? Super star status of CEOs?, or timing of option grants? Or is there an economically justified explanation. The answer is sure to surprise many who read only mainstream publications! In the authors’ own words

Academic Journal Ranking Manipulations

The Unknown Professor has a fascinating post today about how Journal Rankings may be manipulated.Two longish look-ins:"In today's Wall Street Journal (online subscription required) Sharon Begley provides a rare look into the world of academic journal rankings. She describes some of the ways that scientific journals manipulate their "impact factors"."and later describing his/her (I would imagine

Do genes influence who will be entrepreneurs?

Do genes influence who will be entrepreneurs?"A study of identical twins by researchers in Britain and the United States suggests family environment has little influence because nearly half of a person's propensity to be self-employed, or entrepreneurial, is due to genes. "This relatively high heritability suggests the importance of considering genetic factors to explain why some people are

CEO Bonus Problems--yes there is some risk, but

Wow. The NY Times has a great example of what can go wrong with Executive Compensation.Some highlights:* " As executive pay packages have rocketed in recent years, their defenders have contended that because most are tied to company performance, they are both earned and deserved. But as the Las Vegas Sands example shows, investors who plow through company filings often find that executive