Economics Humor

No, it is not from this site devoted to economics humor, but a true story!Yesterday I joined a group of cyclists for a 50 miler in the local state park.During summer months the park charges $7.00(?) per car from 10:00-4:30. Our ride started at 4:00 pm so for those doing the entire ride (there were shorter options), we were expected to pay the $7.00.While no one wants to pay, I figure that any

well well well

Monitoring might work afterall...lol ;)First go back a ways and read this from two weeks ago. A look in:"...earlier this week Sharesleuth made their first publication coming out harshly against Xethanol(XNL). Sharesleuth claims that the firm is dramatically overvalued and that its reported leadership position in the field of ethanol production is largely just hype."And now from Sharesleuth:"

Common Investment Mistakes

Could almost be called "Behavioral Finance in Practice" by the Wall Street Journal's Jonathan Clements from MoneyWeb:Some look-ins:""People tend to buy the investments they wish they had bought last year," says Terrance Odean, a finance professor at the University of California at Berkeley. "Partly, people simply extrapolate the past trend. But also, people feel that the markets are more

Does friendliness trump independence?

Wow.SUPER Quick version: if the threat of monitoring causes managers to withhold information, the advising aspect of a board is impaired and the firm suffers. A solution may be a portion of the board that advises and a portion that monitors, which while often unweildy is exactly what happens in many European nations.From the University of Queenland's Newsletter:"Research by UQ Business School's

Are CEOs overpaid?

Yeah, I know I said I would go a while before posting, but Rich forwarded this to me and I think many of you will be interested. It is from MSNBC/Newsweek:A few look-ins:*"Ogling executive pay is the spectator sport of business. The catcalls from the stands have gotten louder as new studies throw out eye-popping statistics about how rich CEOs are getting, while the rest of us worry about keeping

A "before-semester time-out"

Hi everyone...I haven't written about "non finance things" in a while and figured before classes would be a good time to say hello and let you know that this week will not have many posts. Things are going well on this end. Busy, but that is a good thing right? ;) However, like most things busyness is good only in moderation. Why? Hhave you ever fell way behind and started to feel you could

Should you hold multiple mutual funds?

Should you hold multiple equity funds? Yes!One of the more frequently asked questions from family and friends is whether there is any advantage to holding multiple mutual funds or whether a single fund yields the same diversification benefits.Fortunately Louton and Saroglu shine some light on this question in their working paper "Individual Investors' Asset Allocation and Number of Mutual Fund

Executive compensation around the world

Executive compensation is always a hot and interesting topic and this paper by Bryan, Nash, and Patel (all from Wake Forest) is no exception!SUPER short recap:Pay varies with institutional factors and protections from country to country.As a general rule, if agency costs are high then firms pay with more equity.Large firms use more equity compensation than do small firms.There does not appear to

FMA reminder

Probably my favorite finance conference is the FMA annual meeting. This year it is in Salt Lake City from October 11-14.Over the next couple of months I will give some greater emphasis to papers from conference.The program and registration information is available here.

Why Smart People make Big Money Mistakes

If you have any interest in behavioral finance or if you are looking for simple examples for class, I would definitely recommend "Why Smart People make Big Money Mistakes" by Gary Belsky and Thomas Gilovich.I bought it for the examples and it has proven to be a very quick, easy, yet informative and fun read!For instance it deals with problems people have figuring out odds (the exampleis instantly

How do you say? Stock returns and pronunciation

How people decide things is a fascinating topic. Recent work from marketing, psychology, and even finance is now suggesting that we may not know as much as we thought we did on how people make decisions.For instance, how do you decide what cereal to buy? or what team to root for? or what stock to buy?Atler and Oppenheimer (psychologists) contribute to this investigation with a paper that

Monkey pay? Monkey do

Financial Rounds points out a really really cool article that shows for the zillionth time that economics works.The blog entry is a review of a paper by Boyle who examines issues within academia. Now it has become my trademark to mention whenever pay issues come up that there are two key points to every pay issue: the form of pay and the level of pay. Form of pay is what creates incentives,

Finance, Literature, Science, History, and more

This is good! Using non finance examples to get finance across.From Reuters:"Economics may be called the dismal science, but that doesn't mean that anyone who writes about it or its sibling, investment, has to be dull.How about '60s rockers Crosby, Stills & Nash to illustrate the need for a rebalancing of global financial fundamentals?Or a population explosion among jellyfish off the coast of

Cramer Vs Chimp

FinancialRounds pointed this out, but if you missed it, go watch it NOW! If for no other reason you will be humming the music for the rest of the day! lol...

Consumer Confidence and Stock Returns

Every week it seems some news agency is reporting consumer confidence numbers. For instance from ABC News:" Consumer confidence is showing strain. Faced with the highest gas prices since Hurricane Katrina, soft job growth, and a cooling economy, it has slipped to its lowest level in seven weeks. The ABC News/Washington Post Consumer Comfort Index stands at -12 on its scale of +100 to -100 this

Sharesleuth and Xethanol

By now many of you probably have heard of Mark Cuban's Sharesleuth.com. It has been widely reported (see Financial Rounds, Cuban's own BlogMaverick, and Gary Weiss's blog).If you have not seen the site, go and see for yourself!What is it? From ShareSleuth itself:"Call it journalism. Call it investigative blogging. Call it what you will.More than 13,000 companies are listed on U.S. stock

Interesting podcast from Jeremy Siegel

Knowledge@Whatron has a podcast interview with Jeremy Siegel on recent news ranging from the Fed's decsion to not raise rates to the Middle East to the Alaskan Pipeline. A quick example:"Knowledge@Wharton: After 17 consecutive interest rate hikes, the Federal Reserve decided on August 8 not to raise the federal funds rate. Joining us to discuss this recent decision is Jeremy Siegel, professor of

Adam Smith and Behavioral Finance

Harvard Business Schools "Working Knowledge" has a fascinating look at Adam Smith and Behavioral Finance/Economics.Super short version: Smith's early writings (pre Wealth of Nations) laid much of the ground work for what we now call Behavioral Finance.A few look-ins:"The Theory of Moral Sentiments [TMS]... caught the attention of Harvard Business School professor Nava Ashraf and coauthors Colin

Clearing mail box

Ok, I am back...Went to Virginia (and West Virginia) for a bike ride. Wow, what a ride. Supposedly the hilliest Century east of the Rockies. Not sure if it is or is not, but it is hard and hilly! Over 13,400 feet of climbing with 9 named climbs. Great fun!I will get back to seriously posting finance stuff either later tonight or tomorrow, but a few articles that were sent to me (either by

Derivatives shown to increase volatility

Well Fischer Black is right again. Or at least that is the conclusion of a new paper by Bhamra and Uppal. They model a market with and without "non redundant derivatives" and find that derivatives do lead to increased return volatility. A few look-ins at their largely theoretical paper:* "Our main result is to show that introducing a new derivative security that improves risksharing leads to an

Does initial success breed overconfidence and fraud?

USATODAY.com has an interesting article that looks at fraud throughout the last several decades. A common trait in many of the cases? The company had been doing very well, then competition came along, and pretty soon troubles began. Bright ideas gone bust can lead to corporate fraud: "For type-A executives who have introduced landmark changes to their industries, it's a thin line between

CFO.com on one impact of back dating

Gee, I ad not thought of this impact:From CFO.com:"Lost amid the swirl of media attention, however, is what backdating, or other practices, such as re-pricing, might mean if you happen to be one of the people who holds those options. In much the same way that backdating is now prompting some companies to restate, corporate tinkering with options can damage the personal equivalent of a