Happy 2008!

Happy New Year!!Sorry I have been so bad of late updating the blog. Just too many things going on with a paper, an article to review, plus BonaResponds, and trying to put together a book. Stay tuned.I will be gone for about 10 days to work on Hurricane some homes in Mississippi where I probably will not have much internet access, but will be back in a few weeks when classes start on the 14th.

Jim Cramer: Mad No More?

Jim Cramer: Mad No More?: "How about this for a new surprise? Jim Cramer, sober-minded personal finance guru.It creates some contradictions. The hyperactive stockpicker on CNBC's Mad Money has a new book out advising most readers not to buy individual stocks at all"Wow. A Christmas miracle? Or more likely he has known it all along and realized that picking stocks makes for better TV.

Freakonomics Being Documentary-ized « FirstShowing.net

Indie Spotlight: Freakonomics Being Documentary-ized « FirstShowing.net: "...an upcoming adaptation of the New York Times Bestseller by Steven Levitt and Stephen J. Dubner - Freakonomics. The catch is that a group of documentary directors are teaming up to make a documentary based on Freakonomics, with each making a 15 minute segment based off of a couple of chapters."I cannot remember the last

The Anatomy of Financial Crises: Understanding Their Causes and Consequences - Knowledge@Wharton

Gee, I may have to ask Santa for this one. It looks VERY good!The Anatomy of Financial Crises: Understanding Their Causes and Consequences - Knowledge@Wharton: "Crises have been a feature of the financial landscape for hundreds of years. They often appear with little warning, as the sub-prime mortgage crisis of 2007 and the Asian crisis of 1997-1998 illustrate. It's not always clear what causes

Stocks rise when sun shines | Dallas Morning News | News for Dallas, Texas | Business

We've talked about this several times in class so when I stumbled upon this in the Dallas Morning News (it is orignally from the Washington Post) I figured I better share it!Stocks rise when sun shines | Dallas Morning News | News for Dallas, Texas | Business: "In a study of 26 stock markets around the world between 1982 and 1997, researchers David Hirshleifer and Tyler Shumway showed that the

Well this is one way to make sure people pay their loans!

Yeah...well I guess...hope this one is not true, but given the high default rates we are seeing, maybe...lol...Loan thugs strike again, bash up 58-year-old professor- Hindustan Times: "THE POLICE are investigating charges leveled by a professor of a reputed engineering college against a multinational bank, which allegedly sent a pack of intimidating loan recovery agents to hound him. Prof J.S.

Yet more reasons on why there are more Buys than Sells

Bloomberg.com: Exclusive: "Shrinking fees from brokerage commissions mean fewer dollars for research and more pressure on analysts to hang on to paying customers such as hedge funds. While clients care little for ratings, they covet meetings with company executives -- audiences that favored analysts can deliver. As a result, ``sell'' ratings on Wall Street are even scarcer than four years ago,

NYSE fights to maintain once crowded trading floor

AFP: NYSE fights to maintain once crowded trading floor: "The computer age has wiped out the need for human traders in many stock markets around the world, but the New York Stock Exchange is fighting to ensure the survival of its historic trading floor. At 11 Wall Street behind the NYSE's imposing white marble facade, about 1,500 dealers continue to buy and sell shares on the exchange's trading

Blaine Lourd Profile - Executive Articles - Portfolio.com

What a great article! Inherently readable, a great story, and even ends up with a happy ending. I usually hate to give away the story, but in this case I will. It is the story of a stereotypical stock broker who sees the light and realizes that indexing is generally a better idea.Blaine Lourd Profile - Executive Articles - Portfolio.com: "As a group, professional money managers control more

An Airline Shrugs at Oil Prices - New York Times

An Airline Shrugs at Oil Prices - New York Times: "Southwest owns long-term contracts to buy most of its fuel through 2009 for what it would cost if oil were $51 a barrel. The value of those hedges soared as oil raced above $90 a barrel, and they are now worth more than $2 billion. Those gains will mostly be realized over the next two years. Other major airlines passed on buying all but the

Do International Financial Reporting Standards Live Up to Their Promise? - Knowledge@Wharton

Do International Financial Reporting Standards Live Up to Their Promise? - Knowledge@Wharton: "Under the lead of the International Accounting Standards Board (IASB), already more than 100 countries, most notably the European Union and many Asian economies, have either implemented International Financial Reporting Standards (IFRS) or plan to do so. So far, the United States has been a holdout.

The Subprime Drama Continues, but for How Long? - Knowledge@Wharton

Wharton's Knowledge@wharton has a good discussion with Richard Herring on the continuing developments in the real estate and sub-prime lending markets.The Subprime Drama Continues, but for How Long? - Knowledge@Wharton: "Has the crisis run its course? Knowledge@Wharton asked that question and several more to Richard Herring, a professor of finance at Wharton and co-director of the Wharton

Private placements

Another financial instiitution that had had major writedowns gets a cash infusion.Bloomberg.com: Worldwide: "-- E*Trade Financial Corp., the U.S. discount broker grappling with mortgage losses, will get a $2.55 billion cash infusion from a group led by hedge-fund manager Citadel Investment Group LLC."This is on the heels of Citi getting $7.5 Billion from Abu Dhabi."Investors seem delighted that

SSRN-Do Buyouts (Still) Create Value? by Shourun Guo, Edith Hotchkiss, Weihong Song

I do not have time to really comment on this one, but I did find it very interesting. I'll try to add some to this later, but at least I can point it out and quote the abstract.SSRN-Do Buyouts (Still) Create Value? by Shourun Guo, Edith Hotchkiss, Weihong Song: "For a sample of 176 buyouts completed between 1990 and 2006, we show that these deals are somewhat more conservatively priced and lower

Fed to Inject $8 Billion to Lubricate Economy - New York Times

Fed to Inject $8 Billion to Lubricate Economy - New York Times:"Seeking to reassure banks amid the continuing credit crisis, the Federal Reserve said yesterday that it would provide $8 billion in funds to ease concerns about lending during the holiday season. The $8 billion — essentially a low-interest loan to the nation’s banks — will be issued Wednesday and repaid Jan. 10. The 43-day

BonaResponds "commercial"

My day job is a financeprofessor, but what most on campus know me for is my role in BonaResponds. In that light, you can call this an agency cost problem if you must, but here is an unpaid for advertisement... Help BonaResponds While Shopping! Ok, this is easy. All you have to do is click through this link and then shop at any of 100s of stores (Barnes and Noble,

I think someone has been spying on our Faculty meetings!

Somehow the Unknown professor has been spying on our faculty meetings. He has to have been. There is no way he could have had so many items EXACTLY correct! LOL... Hi is starting a faculty meeting Bingo--the games won't last long!

Seems like Bonuses won't suffer as much as most expected

Bloomberg.com: U.S.: "Securities firms typically use slightly less than 50 percent of their revenue to pay salaries, benefits and bonuses....Year-end bonuses usually account for about 60 percent of compensation. In the first nine months of 2007, Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns told their shareholders that they set aside $52.4 billion for compensation, up 9 percent from

Congratulations to Robert Strong!

The University of Maine - News - November 16, 2007 - Carnegie Foundation Names UMaine's Strong 2007 Maine Professor of the Year: "Robert A. Strong, a University of Maine professor of finance, has been selected as the 2007 Maine Professor of the Year by the Carnegie Foundation for the Advancement of Teaching and the Council for the Advancement and Support of Education (CASE.)"A very good choice.

The Sums of All Parts: Redesigning Financials - Accounting - CFO.com

Look for changes in financial statements soon:The Sums of All Parts: Redesigning Financials - Accounting - CFO.com: " ...another large step towards the most dramatic overhaul of financialstatements in decades, the Financial Accounting Standards Board Wednesday laidout a series of subtotal figures that companies would be required to include ontheir balance sheets, income statements and cash flow

Fannie Mae's credit losses still in doubt - Nov. 16, 2007

Well that didn't take long. The day after I speculated with zero evidence of the nightmare that would exist if one of the big agencies got into trouble, Fortune had the same idea but they backed it up with the troubling accounting game that Fannie Mae apparently was playing:As usual when you try to hide something on investors, they tend to get annoyed and more distrustful. The result? A

Steven Levitt Lecture

.flickr-photo { }.flickr-frame { float: right; text-align: center; margin-left: 15px; margin-bottom: 15px; }.flickr-caption { font-size: 0.8em; margin-top: 0px; } at the Steven Levitt lecture,originally uploaded by FinanceProfessor. I took a small group to the Steven Levitt(of Freakonomics' fame )Lecture at UB this week. I will give you some highlights soon.Weird going to an academic lecture (

Interesting history lessons

Yeah this is probably sort of trivial, but I love history and finance so the combination of the two is too good to pass up. This is on the 1920s. It shows the how the stock market worked with specialists at posts and how the ticker tape was created--the video of order confirmations is fascinating and reminscient from my mental picture of Orwell's 1984), the risks of buying on margin, and the

Transactions costs, renting, and leasing

While leasing is a topic we won't cover in class to any detail until later in the semester, a friend called all excited about ZipCars today. ZipCars allows you to rent for periods as short as as an hour. In their words: "Zipcar is the closest thing to owning a car without the cost and headaches. It's also more convenient, cost-effective and more fun than renting."The call got me thinking: As

Make a difference

I know there are literally thousands of great causes out there. Take, BonaResponds for instance, which is always looking for donations (we are adopting a family in Mississippi and helping to rebuild their home which will cost about $20,000) so I am definitely not saying do one to the exclusion of others, but this one seems like quite a "win-win". I am giving it a try. Give one, get one: "

Illustrated Cash Flow For Dummies

Illustrated Cash Flow For Dummies: "Illustrated Cash Flow For Dummies"Pretty funny. A good visual lesson on your personal finance!

Google Options Make Masseuse a Multimillionaire - New York Times

Google Options Make Masseuse a Multimillionaire - New York Times:Co-founders Larry Page and Sergey Brin are each worth about $20 B each and the weatlth has not stopped there. A few look-ins: " Although no one keeps an official count of Google millionaires, it is estimated that 1,000 people each have more than $5 million worth of Google shares from stock grants and stock options.""“It isn’t

Mortgage Crisis Extends Its Reach - WSJ.com

Sometimes things change really quickly for instance, there are now calls to expand Government's role in the housing market. Huh? Only months ago the exact opposite was being considered!From the Wall Street Journal--Mortgage Crisis Extends Its Reach - WSJ.com: "The expanding government role isn't the result of initiatives from Washington. As investors have fled from housing exposure, lenders

Do you have a student managed investment fund?

From Edward Lawrence:"The University of Missouri - St. Louis is in the process of collecting data on all Student Managed Investment Funds in the world."If you have not filled out his survey and do have a fund, email him or Kerry Sallee. Edward C. Lawrence, Ph.D.Professor of Finance & Area CoordinatorCollege of BusinessOne University BoulevardUniversity of Missouri - St Louis

Real Estate, CDOs, Banks, and the Economy

The story began in June when trouble in the real estate market (which played out first as sub-prime borrowers could not make payments) began spilling over to the banking industry (Bear was the to acknowledge the damage as it took writedowns (and then made loans to) two of its hedge funds as their holdings of CDOs (a type of mortgage backed security) fell sharply. In recent weeks the problems

Corporate goverance making inroads in Nigeria!

In a story that shows the importance of capital markets and governance, the Central Bank of Nigeria is pushing for better corporate governance of banks. Remember that Nigeria wants to grow into one of the top 20 economies by 2020, this is a good start.allAfrica.com: Nigeria: No Bank Survives Without Good Corporate Governance -CBN (Page 1 of 1): "The Central Bank of Nigeria (CBN) has restated

Science Journal - WSJ.com

Science Journal - WSJ.com: A look at the Puri and Robinson JFE article on optimism. "Optimists, the Duke finance scholars discovered, worked longer hours everyweek, expected to retire later in life, were less likely to smoke and, when theydivorced, were more likely to remarry. They also saved more, had more of theirwealth in liquid assets, invested more in individual stocks and paid

Index of Orlando FMA Papers

Index of Orlando Papers: A reader commented today that the FMA had taken down the program from last month's Meetings in Orlando. Fortunately they did leave the directory of papers online. Enjoy!

Fall 2007 FMA Online--

Fall 2007 FMA Online: ""Jay's Ritter's Keynote Address tackles the question of if there is a corporate governance premium for listing in the United States, with an insightful look at international competition for new listings of IPOs."At the FMA's in Orlando I was talking to a friend and our comments about Jay Ritter were almost identical: "He is a genius." Well here is your chance to watch his

A conversation with with the CEO of General Electric Jeffrey Immelt - Charlie Rose

A conversation with with the CEO of General Electric Jeffrey Immelt - Charlie Rose: "A conversation with with the CEO of General Electric Jeffrey Immelt"Immelt talks on risk and return, globalization, global warming, foreign exchange risks, the US dollar and trade deficit, the role of government, and much more. It is really good. We can debate if he is an expert on some of the things (say

No More Bench Strength - New York Times

The NY Times missed a great opportunity here. The article is good, but it could have been great. First the facts from the article.No More Bench Strength - New York Times: "Thirty years ago, companies rarely looked beyond their own executives to find new chiefs, said Kevin J. Murphy, a professor of finance at the Marshall School of Business at the University of Southern California. In the 1970s,

Study: Free beats fee for Radiohead's 'In Rainbows' | Tech news blog - CNET News.com

I have to admit this is probably not strictly speaking finance, but it is REALLY interesting, so....First the background: Radiohead released their newest album free online. They merely asked people to donate. Well, the album was released and the tallies are coming in. And not overly surprisingly, people did not give all that much. Some highlights:Study: Free beats fee for Radiohead's 'In

A few other blogs that you might be interested in

Without boring the entire finance world, there are two other finance blogs that I help with. One is for just my finance classes, the other is for a our student-run investment portfolio class (called Students in Money Management or SIMM). Feel free to read either or both, they do have quite a few interesting posts.

Does short-term debt lead to more "earnings management"?

In another paper from the FMAs, Gupta and Fields look at whether more short term debt leads to more "earnings management."Does short-term debt lead to more "earnings management"?Short answer: YES.Longer answer:Intuitively the idea behind the paper is that if a firm has to go back to the capital markets, they do not want to do so when times are bad. Of course, sometimes times are bad. In those

CIBC analyst got death threats on Citigroup: report - Yahoo! News

It is well known that there have traditionally been many more buy recommendations than sell. This has been largely explained incentives both of the analyst (who does not want to lose the information that comes from better access to management) and from the brokerage firm (who does not want to lose potential investment banking business). Recent research (Kadan, Madureira, Wang, and Zach)

Google Reader -Jim's shared items

Google Reader -Jim's shared items: Google's Sharing feature is really cool. For what is worth here are articles that I liked and thought you might. It is updated regularly.

Britney Spends Big, Court Papers Reveal - washingtonpost.com

Britney Spends Big, Court Papers Reveal - washingtonpost.com: "Court papers released Thursday in Britney Spears' custody dispute with Kevin Federline show she spends lavishly on clothes and entertainment, and doesn't save or invest any of her roughly $737,000 monthly income....she spends zero on education, savings and investments and gives $500 a month in charitable contributions...." I have

Obesity Epidemic Among CEO Pay - Business on The Huffington Post

Eve Tahmincioglu: Obesity Epidemic Among CEO Pay - Business on The Huffington Post: "Stanley O'Neal who is leaving Merrill Lynch after giving it a big fat gift of a $8 billion dollar write-off thanks to risky investments. The board just can't help but feed this obesity epidemic. They're giving him $160 million plus in severance for his troubles as he heads for the door. At some point, the

What is I^3?

I^3 papers are those papers that I feel are extra special. The I^3 moniker stands for Interesting, Informative, and Important. You could do much worse than reading them. They really are good. Here are some past winners.

IPO Underpricing, Earnings Quality, and more

Another FMA paper. This one looks at IPO underpricing and Earnings Quality and is by Thomas J. Boulton, Scott B. Smart, Chad J. Zutter.The shortest version is that using international evidence the authors find underpricing is greater where earnings quality (transparency) and liquidity are lower.The abstract says it best: "Examining 7,306 IPOs from 34 countries, we find less underpricing in

The News-Gazette.com:Top salaries continue to rise as UI competes for talent

Well this was sent to me, it is not to as a means of saying so and so gets too much, merely to report that it really is a different world. This is from the University of Illinois. The News-Gazette.com:Top salaries continue to rise as UI competes for talent : "As of fall 2006, the average salary for a full-time professor at the UI was $95,700, up $13,400 or 16 percent since 2002. When comparing

Financial Rounds

I know I mention him all the time, but I actually saw him at FMAs (did not get to speak as he was presenting and I had to leave early for an interview, but the Unknown Professor over at the FinancialRounds has put up some thoughts on the FMA interviews he did as well as his FAQ which even mentions this blog :)

Do Mutual Funds vote responsibly? Evidence from Proxy voting

Another paper from the FMAs:Do Mutual Funds vote Responsibly? Evidence from Proxy Voting by Ng, Wang, and ZaiatsMultiple Choice answer: SometimesShort Answer Answer: Mutual funds frequently vote in a manner that does not appear to be in shareholders' best interest.Essay Answer: How mutual fund managers vote the shares of their fund is a hot topic both because of the growing emphasis on

Do Finance Profs practice what they preach?

Sometimes the most important finding of an article is not played up while lesser items (especially those that appear to more exciting or controversial) are given more play. For instance from SmartMoney:Finance Profs Reveal How They Invest Own Money (The Pro Shop) | SmartMoney.com: "Colby Wright, assistant professor of finance at Central Michigan University and James Doran, finance professor at

The Science Education Myth - Yahoo! News

For those who have read the World is Flat I thought you might be interested in this one even if the jury is still out.The Science Education Myth - Yahoo! News: "The authors of the report, the Urban Institute's Hal Salzman and GeorgetownUniversity professor Lindsay Lowell, show that math, science, and reading testscores at the primary and secondary level have increased over the past twodecades,

FTC Appeals to Court to Undo Whole Foods-Wild Oats Merger - WSJ.com

FTC Appeals to Court to Undo Whole Foods-Wild Oats Merger - WSJ.com: "In an unusual move, the Federal Trade Commission is trying to disrupt the merger of natural-foods grocers Whole Foods Market Inc. and Wild Oats Markets Inc. after the deal has already been consummated. The FTC is asking a Washington appellate court to review a federal-district court ruling in August that allowed the $565

Catching up after FMAs before Finance club trip to NYC

Whew...and I thought I became a teacher in part to avoid business travel. LOL...After spending a week in Ohio with BonaResponds, a trip to Orlando for the FMAs, and now to NYC with the finance club should make me ready to stay home for a while.The FMAs were great. I apologize for not getting more online about them already. I have a notebook full of papers to summarize, just need a few minutes

My favorite presentation of the day-Friday

Hard to say today as I had several interviews and missed more presentations than yesterday (we are hiring--if interested, let me know!). The ones I did get to go to were very good.Probably my favorite was session 148 where Robert Monks and Michael Jensen spoke on corporate governance. Nothing super earth shattering as each said what would be expected if you have read their work, but

WSJ Video on Stock crash of 1987

A twenty year look back

Best paper I saw on Thursday

While many papers I have seen here have been very good, possibly the best was by Agarwal, Boyson, and Naik on Hedged Mutual Funds. It is a really interesting and well done paper that is forthcoming in JFQAA. I will discuss the paper soon (have to run to next session right now), but here is some background on hedged mutual funds.From Investopedia:"Hedged mutual funds, although previously only

Hi from the FMAs

Hi everyone,Just a quick note from the FMAs. I saw many good presentations today. Here is the program (it is slow to load). I will be writing on many of the papers in coming days/weeks.

Free Money Finance: Pennies Add Up to Millions

Free Money Finance has two good articles stressing the importance of small things:Free Money Finance: Pennies Add Up to Millions: "...$5 a day over 40 years and invested at 10% yields almost $1.1 million. Isyour daily Starbucks coffee worth a fully-funded retirement when you can drink acheaper version of the same thing that costs a fraction of the price? This isthe heart of what Bach talks about.

3 Americans Win Nobel in Economics - New York Times

3 Americans Win Nobel in Economics - New York Times: "The field of mechanism design theory strives to take into account the realities of economic life systematically. Adam Smith’s “invisible hand” is a powerful metaphor that describes how the market, in theory, will always efficiently allocate scarce resources. Yet real-world conditions tend to complicate things. Competition is not completely

The Associated Press: Nobel Prizes Look to Economics

The Associated Press: Nobel Prizes Look to Economics: "Speculation on this year's prize has included economists who deal with international trade, macroeconomics and the labor market, among others. Fromlet said Jagdish Bhagwati, a noted proponent of free trade and critic of opponents of globalization, was one of his favorites. 'International trade is probably worth a prize,'"Near the end of the

100 years ago

NPR : Lessons from Wall Street's 'Panic of 1907': "On Oct. 17, 1907, panic began to spread on Wall Street after two men tried to corner the copper market. In the months preceding the panic, the stock market was shaky at best; banks and securities firms were contending with major liquidity problems. By mid-October, Wall Street was paralyzed; for days, there were runs on several large banks.

Lessons from the '87 Crash

Twenty years ago....Lessons from the '87 Crash: "In the five trading sessions from Oct. 13 to Oct. 19, 1987, the Dow Jones industrial average lost a third of its value and about $1 trillion of U.S. stock market value was wiped out. The losses culminated in a panic-stricken 22.6% decline in the Dow on Black Monday, Oct. 19. The traumatic drop raised recession fears and had some preparing for

Kimmunique – EDUCATION FOR THE SELF-DIRECTED INVESTOR

Kimmunique – EDUCATION FOR THE SELF-DIRECTED INVESTOR: "Obsession with performance is a disease inflicting most investors. A principled, rational approach makes more sense, but the medicine is difficult to swallow for most."Well said. Make a plan and within reason try to stick to it!

Finance rises to the top - News

Congratulations to the BC finance department!Finance rises to the top - News: "After years of being close, finance has finally overtaken communication as the most popular area of study at Boston College. This marks the first time in University history that a major outside of the College of Arts and Sciences has held the top spot....the Carroll School of Management's finance concentration boasts

Publish and Perish - Forbes.com

Publish and Perish - Forbes.com: "Before taking over Alpha, Mark Carhart was an assistant professor of finance at the University of Southern California. He had studied under Eugene Fama, a founding father of the efficient-market theory, which says investors can't consistently beat the market. Carhart himself drew attention with a research paper warning investors against mutual funds with 'hot

Why the Statement of Cash Flows Matters - TheStreet.com University - The Finance Professor - APPB - BAC

Ironically we just did this today in my Advanced Corp Fin class...So for them it is required reading :)Why the Statement of Cash Flows Matters - TheStreet.com University - The Finance Professor - APPB - BAC: "A company's statement of cash flows creates a bridge -- or reconciliation -- between a company's cash balances from one accounting period to another. The statement of cash flows is important

A conversation with Alan Greenspan - Charlie Rose

A conversation with Alan Greenspan - Charlie Rose: "Alan Greenspan A conversation with Alan Greenspan Keywords: Federal Reserve Board , The Age of Turbulence: Adventures in a New World, greenpsan A conversation with Alan Greenspan about his life, his 18 year tenure as chairman of the U.S. Federal Reserve Board and his book, The Age of Turbulence: Adventures in a New World."Just watched it...

Brittany Spears Explaining the SubPrime Mortgage Market Problems

No that was not a typo. Watch at your own risk.I will warn you the music is by Brittany and the finance is somewhat suspect, but close..and it is funny.

1000 posts! A look around at the news

I just realized I have had 1000 posts on this blog. Which is some kind of milestone I guess. As a 1001 post, I will revert back to a newsletter esq piece with a look around at other blogs, stories, etc...***********************************The Unknown Professor (Financial Rounds) reports on a WSJ article by Robert Reich on CEO pay."Reich then goes on to explain the increase in CEO pay over time

Evidence on Cross listing, governance, and cash holdings

Is cash good or bad? Actually that is roughly how I started my dissertation. The answer is yes.It is both bad and good. Good because it gives firms more flexibility, lowers transaction costs, and allows faster responses to opportunities. Cash is bad because it offers managers too much flexibility and worsens agency cost problems by shielding managers from market discipline (essentially

Hedge funds lure business school profs

Hedge funds lure business school profs: "The growing and lightly regulated hedge fund industry is attracting new players -- business school professors eager to test their theories in a field known for big risks and occasionally bigger rewards. Hedge funds are becoming a tempting tool for faculty members looking to sharpen research and giving a Wall Street perspective to their students, all while

BonaSIMM

I know some of the FinanceProfessors who follow this blog also teach a version of class that has real money invested. At SBU we call it SIMM (Students in Money Management). This is my first semester teaching it. (so if you have any advice, please let me know!)We have (or will soon have) about $150,000 to invest. We have decided to make this as open a fund as possible and will allow much of

Taleb takes on Black, Scholes, Merton

WOW. This one is hard hitting for any paper, let alone an academic paper.And on top of that it is co-authored by Espen Haug and Nissam Taleb (yep same one).The paper itself says "do not quote" so I won't. It also says do not disseminate but the authors (put it online, so I think that one is just for show....lol).But the abstract is fair game, so from the abstract:"However we have historical

Housing costs punish family budgets - USATODAY.com

When you increase fixed costs (be they debt, taxes, or whatever) you increase risk since a very minor slowdown is so magnified (rememebr debt makes good times great, bad times horrible).Thus, this USATODAY article is a partial (and obviously after the fact) look at what is causing so many problems in the sub prime mortgage markets.Housing costs punish family budgets - USATODAY.com: "For some, the

Bear Stearns Update

The window of opportunity - Times Online: "Joe Lewis bought a 7 per cent stake in Bear Stearns, the investment bank which has lost just over a third of its value after the closure of two of its hedge funds. Mr Lewis is best known in the UK for his stake in Tottenham Hotspur. But the investment by the former restaurateur crystallises the question that is on the minds of bankers everywhere: is it

KKR Close to Concession on First Data Deal: Report - New York Times

KKR Close to Concession on First Data Deal: Report - New York Times: "Kohlberg Kravis Roberts & Co. appears willing to make a concession to the banks financing its $26 billion leveraged buyout of payment processor First Data Corp , according to a report on Sunday, in a move that underscores the intense pressure the credit crunch has put on investment banks and their top private equity clients.

Private lives of CEOs tied to profit, loss

For a news paper article, this one is great! It is a series of summaries that basically show that CEO's personal life impacts the firm.Private lives of CEOs tied to profit, loss:"Should shareholders in a company care if the chief executive's child dies? What if the mother-in-law passes away?.....slid by about one-fifth, on average, in the two years after the death of a CEO's child, and by about

Five Things You Must Know About the Fed - TheStreet.com University - The Finance Professor - BAC - C

Taking or teaching a Money and Banking course? Or just interested in learning more about how the Fed works, the Street.com's new site has a nice review of what the role of the Fed now is.Five Things You Must Know About the Fed - TheStreet.com University: "The Fed is responsible for much more than determining the fed funds rates. According to the Fed's own publication entitled The Federal Reserve

SSRN-Motivating Innovation by Gustavo Manso

I was actually looking for another paper by Manso on step up bonds when I found this one. It is pretty cool and very intuitive (you can't punish failures if you want people to take chances). SSRN-Motivating Innovation by Gustavo Manso: "...incentive schemes that motivate exploration are fundamentally different from standard pay-for-performance incentive schemes used to induce effort. The optimal

Shorting Cramer - Barron's Online

You all know my take on Cramer--he is a really smart guy and great marketer, but whether he can beat the market or not is very much in doubt. (And please do not tell me he did and therefore he can--past performance does not guarantee future performance...survivorship bias....etc.)But that said, many people do think the world of him so I was especially interested when a former student texted me

Really it's ok, everyone is doing it

Top four banks tap Fed discount window - Yahoo! News: "Citigroup , Bank of America and other top banks took the rare step of borrowing $2 billion from the U.S. Federal Reserve on Wednesday, in a bid to reassure markets and remove the stigma associated with getting financing from the central bank.... Borrowing money directly from the Fed has historically been seen as a sign of weakness, but Bank

20 timeless money rules - Be humble (1) - Money Magazine

These are good.20 timeless money rules - Money Magazine: "Money Magazine collected the best advice from some of the smartest investors (and other people) who have ever lived."

U of R remembers one of its teachers

More on the sad and tragic death of Mike Barclay:www.whec.com - U of R remembers one of its teachers: "Barclay came to the University of Rochester fresh out of Stanford University in 1985. We learned he was one of the world's top financial economists and finance professors. He'd won eleven teaching awards. Ranked by Business Week magazine as one of the top 12 professors in the United States. His

Dell, Admitting Managers Inflated Sales Reports, Will Restate Income - New York Times

Dell, Admitting Managers Inflated Sales Reports, Will Restate Income - New York Times: "The senior management of Dell regularly falsified quarterly returns from 2003 through 2006 to create the appearance that the company had met sales targets, the computer maker disclosed Thursday. The accounting misconduct also resulted in inflated earnings, so the company will restate its net income for the

The profession lost one of my favorite professors today

A friend just emailed me with the horrible news that Michael Barclay was killed today in a plane crash. I took him for several classes and can say he was one of my favorite teachers I ever had. From the Rochester Business Journal: "Michael Barclay, a member of the Simon Graduate School of Business finance faculty at the University of Rochester for more than two decades, died Thursday in a

Adelphia's Rigases Report to Prison - Forbes.com

Adelphia's Rigases Report to Prison - Forbes.com: "After fighting one of the nation's largest corporate fraud cases, former Adelphia Communications executives John and Timothy Rigas reported Monday to a federal prison in North Carolina. Adelphia founder John Rigas and his son Tim, the company's former chief financial officer, were convicted in 2004 on multiple charges of securities fraud,

A look at Bear and Goldman

Bloomberg.com: Worldwide: "When Bear Stearns's two funds, High-Grade Structured Credit Strategies and High-Grade Structured Credit Strategies Enhanced Leverage, nosedived in June, the company tried to forestall a total collapse by halting withdrawals and unloading securities to meet lenders' demand for more collateral. That strategy failed, and Bear Stearns was forced to bail out one of the funds

The Insiders Aren’t So Bearish, After All - New York Times

The Insiders Aren’t So Bearish, After All - New York Times: "Professor Seyhun argues, insider sales need to be weighed according to whether they occur immediately after the exercise of an option. In unpublished research, he has done just that. And he has taken into account other factors he has found to be important in interpreting insider behavior. These include the type of insider who made the

Deloitte to Pay $167.5M in Adelphia Case - Auditing - CFO.com

Deloitte to Pay $167.5M in Adelphia Case - Auditing - CFO.com: "Deloitte & Touche has agreed to pay $167.5 million to settle a case with a trust that was formed after Adelphia Communications Corp. collapsed in 2002. The news comes just as former Adelphia CFO Timothy Rigas and his father, Adelphia founder John Rigas, head to federal prison."

Is it spreading?

I feel like I did when SARS was the big scare or watching Bird Flue outbreaks? I guess that is why they call it contagion!BNP Paribas Freezes 3 Funds - New York Times: "France's biggest listed bank, BNP Paribas , froze 1.6 billion euros ($2.2 billion) worth of funds on Thursday, citing the U.S. subprime mortgage sector woes that have rattled financial markets worldwide.The frozen funds amount to

Is Cramer right? Yes and no

While his rampage was funny, was Cramer's message correct? Is there a liquidity problem? Is it getting worse?I obviously do not know (and as Cramer points out Academics don't know things like this), but did have a few people contact me about it and there is some evidence that things are getting bad, but not Armageddon bad as Cramer claimed).But here are some articles that suggest things are at

S&P Launches U.S. Commercial Real Estate Indices Developed with Schwab

Worried about a lack of liquidity impacting real estate? Once again financial innovation allows a way of hedging this risk. S&P Launches U.S. Commercial Real Estate Indices Developed with Schwab: "Expanding its widely followed suite of investable real estate indices, Standard & Poor's announced today the launch of the S&P/GRA Commercial Real Estate Indices (SPCREX). The indices measure the

Bankdating leads to conviction

NY Times:"Jurors in Federal District Court in San Francisco convicted the former chief executive of Brocade Communications Systems, Gregory L. Reyes, 44, on 10 counts of conspiracy and fraud.The verdict ended a five-week trial in which Mr. Reyes was accused of intentionally changing the grant dates for hundreds of stock option awards without disclosing the move to investors."As a Met's fan, the

SSRN-Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time by Craig Doidge, George Karolyi, René Stulz

NY still has it! That is the conclusion of a new working paper by Doidge, Karolyi, and Stulz. They find that while fewer firms are cross listing on the NYSE, it is not due to increased regulation.SSRN-Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time by Craig Doidge, George Karolyi, René Stulz:From the abstract:"This decline in cross-listings

Catching up, Looking around.

Yeah it is time to try to clear my desktop again, so here are some of the interesting articles I have been meaning to mention:From the NY Times DealBook:A "Jerk Premium"?"Daniel Gross of Slate has an additional theory: Part of the price — possibly as much as a billion dollars, he estimates — was simply the amount that Mr. Murdoch had to pay to compensate for his off-putting reputation. Mr. Gross’

Money: The Dollar's Depths, Explained - US News and World Report

USNews and World Report has an interesting "interview" with Columbia Business School Finance ProfessorRobert Hodrick on the dollar and forex. Money: The Dollar's Depths, Explained - US News and World Report: "...the U.S. current account deficit is about $800 billion a year, which means every business day we buy in excess of $3 billion of foreign goods and services more than foreigners buy here.US

Free Money Finance: Warren Buffet Recommends Index Funds

Free Money Finance does its normal wonderful job on commenting on Buffet's comments on Index funds!Free Money Finance: Warren Buffet Recommends Index FundsBTW in this Buffet is also saying that Hedge Funds are not all they are cracked up to be either.

More fall out from Bear Stearns

Bear Stearns preparing to oust president: WSJ | News | Market News | Reuters: "Bear Stearns Cos....whose shares slumped on Friday, is preparing to oust Warren Spector, one of its two presidents and its co-chief operating officer, the Wall Street Journal reported on Saturday."

How Murdoch will act at the Wall Street Journal from Greenslade

I love reading the Wall Street Journal. Thus, it has been with largely silent concern that I have watched from a far the takeover by Robert Murdoch. Of course Murdoch has no incentive to ruin the paper, but my worry is that rather than ruin it, he will change it. Make it more mainstream etc. (even more than a liberal-conservative worry, I can see the paper being "dumbed down" to sell more

Higher Deductibles Sting Homeowners - MarketWatch

While the person who sent this to me wanted me to criticize it, I can not find anything wrong with it. Indeed it seems a good way to keep premiums down.Higher Deductibles Sting Homeowners - MarketWatch: "...more insurers change how they calculate deductibles, especially for damage caused by windstorms and other natural events. The newer method of figuring deductibles is based on a percentage of

What’s My House Worth? And Now? - New York Times

Info overload? What’s My House Worth? And Now? - New York Times: "In June, for instance, more than 39 million people visited the 20 most popular real estate Web sites, a 22.4 percent increase in visitors over the same period in the previous year, according to Nielsen/NetRatings Inc. Not only that, but a lot of those people are becoming addicted. At Zillow.com, for instance, 44 percent of the site

The Hedge-Fund 'Clones' - WSJ.com

Hedge fund clones are designed to mimic the return on hedge funds without quite so high of expenses or minimums.The Hedge-Fund 'Clones' - WSJ.com: "...the most common type of hedge-fund cloning, known as the factor model approach, works: Firms analyze a few years' worth of hedge-fund returns, often using data from hedge-fund indexes. The firms then essentially reverse-engineer those returns,

Catching up on some interesting news/posts

Time to clean up my "desktop" a bit...so here are some of the interesting stories that have accumulated there:FT.com / Lex - Investment banks and private banking: "But surely investment banking and private banking are a natural fit? In the world’s fastest growing markets, the development of capital markets and the increase in personal wealth are interlinked. Arranging an initial public offering

Do family firms disclosure more? or less?

Quick--more or less?Answer: less.If you said "less" you are correct. And will enjoy the article knowing you got it right!If you said "more" you are incorrect and will get alot out of the article!Chen, Chen, and Cheng examine"family firms: "...an important organization form, it accounts for approximately 46% of the S&P 1500 firms.1 Family firms are characterized by the founding family’s

Nike Delays Vick's Shoe After NFL Star Is Indicted - WSJ.com

Reputation matters. Good or bad. So it is no surprise that when the horrific charges against Michael Vick have been filed, Nike is now facing tough decisions. Nike Delays Vick's Shoe After NFL Star Is Indicted - WSJ.com: "'Nike is concerned by the serious and highly disturbing allegations made against Michael Vick and we consider any cruelty to animals inhumane and abhorrent,' the company said

Cash and growth? Not a contradiction!

Growing with the Flow - Metrics - CFO.comCFO.com and Georgia Tech's Charles Mulford point out that growing firms often consume much cash and the growth must be financed, it is not always the case. In fact, for many firms cash flows actually increase as the firm grows.A look-in:"Growth is often considered to be a cash drain," says Mulford, director of the lab and professor of accounting at

Interview with Nassim Taleb at Bloomberg

Fooled by Randomness and The Black Swan are each great, thought provoking books. And to top that, Taleb never wears a tie, so he has to be a good guy! But seriously give him a listen. (Thanks to MoneyScience for pointing it out!)MoneyScience Financial Intelligence Network : Podcast: Nassim Taleb at Bloomberg: "Available at the Bloomberg Podcast Page, Nassim Nicholas Taleb, founder of New

How (and why) to invest in commodities

When we speak about diversification we always provide lip service to investing in assets with low correlations, but since most take this to mean different stocks (equities) we sometimes mention other assets but few know how to invest in these other assets such as commodities.Because of that lack of knowledge SmartMoney looks at ways that investors can invest in commodities without having to trade

Economists puzzled by irrational eBay buyers - USATODAY.com

Wow. I have not read the actual study, but if USAToday has it even half correct, this is some solid evidence that people do not always act rationally. I guess the alternative explanation will likely be that the bidder gets more utility (bragging rights?) by winning the auction.Economists puzzled by irrational eBay buyers - USATODAY.com: "Ulrike Malmendier, an economist at the University of

Hedge funds and performance

Given all the attention hedge funds have been getting over the past few years, it is good to be reminded occasionally that when measured against a proper benchmark most hedge funds do NOT outperform. The following is from Ramit Sethi writing at Iwillteachyoutoberich.I Will Teach You To Be Rich » Behind-the-scenes New Yorker article on hedge funds reveals they aren’t so sexy: "...people with

SSRN-Corporate Governance and Firm Value: Endogeneity-Free Evidence from Korea by JungYong Choi, Dong Lee, Kyung Suh Park

Got thinking about class notes for the next semester today. One area where I wanted to firm up a bit was to get some new evidence that governance matters. I guess it was my lucky day since after looking at only 4 papers, I found this interesting piece by Choi, Lee, and Park. They look at the impact of buying by the Korean Governance Fund (a fund who claims to buy firms with poor governance and

David Wright Strikes it Rich with Vitamin Water » Smarter Sports Blog

This really does have finance content! it will make a nice story in class if nothing else...Sure David Wright (and the rest of the Met's power hitters) seem to be mired in a season long funk (maybe Hojo as batting coach can change things?), but do not feel too sorry for David. Seems he made about $20 million in a recent takeover!David Wright Strikes it Rich with Vitamin Water » Smarter Sports

At least a part of the reason

This is not a knock on autoworkers. If they can get paid above market rates, so be it. But when anyone asks why US auto manufacturers are having trouble, the search might begin by looking at some of these stats from over at Autoblog.comU of M Economics professor tackles tough question of UAW wages - Autoblog: "A tip sent us to the blog of Dr. Mark J. Perry, professor of economics and finance at

Predicting equity volatility using Implied Volatilty

Predicting actual volatility using Implied Volatility"In this paper the authors examine460 of the S&P 500 firms to demonstrate that: (1) implied volatility is a better forecaster of realized volatility than historic volatility or GARCH models and (2) the information content of implied volatility significantly decreases with liquidity."Both points are important. The first says that markets are

A Whodunnit in the Hamptons - Ethics - CFO.com

A Whodunnit in the Hamptons - Ethics - CFO.com: "Graham J. Lefford, a former butler to American Idol creator Robert Sillerman, has agreed to a $66,200 settlement in an insider-trading case. The Securities and Exchange Commission had charged Lefford with trading on information he allegedly obtained from faxes sent to Sillerman in 2004, when Sillerman was closing a deal to buy a stake in Elvis

Bigger Bang Better but Dividends better signal?

Bigger Bang - Investor Relations - CFO.com: "When it comes to buying back shares, it pays to think big. Two recent reports — one from Morgan Stanley, the other from Citigroup — find that companies executing the biggest buybacks relative to market capitalisation see their shares rise more than the rest subsequently."Which is interesting enough, but the real reason for inclusion are these two

SSRN-Collateralized Debt Obligations and Credit Risk Transfer by Douglas Lucas, Laurie Goodman, Frank Fabozzi

Talk about a timely article. Lucas, Goodman, and Fabozzi examine collateralized Debt Obligations in this short (and easy to follow) article that looks at how financial institutions can transfer credit risk.SSRN-Collateralized Debt Obligations and Credit Risk Transfer by Douglas Lucas, Laurie Goodman, Frank Fabozzi: "Two recent developments for transferring credit risk are credit derivatives and

FT.com / Companies / Financial services - Moody’s slams private equity

FT.com / Companies / Financial services - Moody’s slams private equity: "Moody’s, the credit rating agency, will on Monday launch an attack on the booming private equity industry, criticising its increasing use of debt to buy companies and questioning its claims that listed companies are better off in private hands.Moody’s voice adds to the growing chorus of US critics, which includes trade

Assets Benchmarked to the S&P 500 Reach $4.91 Trillion; $1.32 Trillion Now Directly Invested: Financial News - Yahoo! Finance

Some interesting stats from Standard and Poor's.Assets Benchmarked to the S&P 500 Reach $4.91 Trillion; $1.32 Trillion Now Directly Invested: Financial News - Yahoo! Finance: "With $4.91 trillion benchmarked to it and $1.32 trillion directly invested, the S&P 500 continues to reign as the world's most followed and influential stock market index. According to Standard & Poor's Annual Survey of

Streets' Alpha Hunters at war with Beta Builders -- that's you - MarketWatch

I have not yet read the book, but I just ordered it (Bernstein's Capital Market's Evolving) thanks to Mark's emailing of the following from CBS:Streets' Alpha Hunters at war with Beta Builders -- that's you - MarketWatch: "Wall Street's high-tech "Alpha Hunters" (benchmark beaters) are in an aggressive psychological war with America's 95 million Main Street investors, the "Beta Builders," average

Heard off the street: When is inside trading not inside trading?

GThe Pittsburgh Post-Gazette looks at the Jagolinzer paper on insider trading that we discussed back in March. Not much of an update, but still interesting:Heard off the street: When is inside trading not inside trading?: "Executives who used 10b5-1 plans beat the market by 6 percent over the subsequent six months while executives who didn't use them beat the market by only 1.9 percent, Mr.

Reading list

I am not sure how it happened, but my book-picking skills have been in top form of late. So since so many liked the last list, here once again I have hit the jackpot with a series of really good books. So without further adieu, here are some of the books I am recommending right now: Finance related:The Black Swan: the Impact of the Highly Improbable by Nassim Nicholas Taleb. Wow. Not

A look around and updates on several topics

A relatively quick look around at quite a few topics:BusinessWeek has an interesting article that touches on Front Running, Proprietary Trading, and regulation. A look-in:" In most cases, however, front-running is vexingly hard to prove. "It's a gray world," says New York University professor Lawrence J. White. "But cooperating to protect high prices and fees is where regulators and plaintiffs

More on Bear, Regulation, and transparency

Mark Gilbert writing for Bloomberg has a well done piece on the implications of the hedge fund problems at Bear Stearns.Bloomberg.com: Opinion:Two lookins:"The most stunning aspect of the demise of two hedge funds belonging to Bear Stearns Cos. is the almost total absence of transparency surrounding the bailout. The debacle may finally provoke regulators, who have long suspected

Going to jail for a while..

Since it now seems that the Rigases will actually serve jail time for their roles in the Adelphia scandal, I thought it would be a good time to mention a very cool paper by Karpoff, Lee, and Martin that is forthcoming in the Journal of Financial Economics on what happens to managers who “cook the books”. Short version? They burn. Longer version: Karpoff, Lee, and Martin look at over 2000

Bear Stearns taps managers to save hedge fund - Yahoo! News

Updates:Bear Stearns taps managers to save hedge fund - Yahoo! News: "Bear Stearns Cos. Inc. said on Tuesday it does not plan to bail out the High-Grade Structured Credit Strategies Enhanced Leverage Fund, the second of two struggling hedge funds.Instead it will provide $1.6 billion of financing to save its High-Grade Structured Credit Strategies Fund. Days earlier the bank had said it would

Humor from the Onion

I have not been able to verify this, but if The Onion is reporting it, it has to be true ;)Greenspan Comes Out Of Retirement For One More Interest Rate HikeWASHINGTON, DC—Confirming a rumor that first appeared in March on the FDIC Fan Forum message board, former Federal Reserve chairman Alan....onion_embed {background: rgb(256, 256, 256) !important;border: 4px solid rgb(65, 160, 65);border-width:

Management in Europe | Pay slips | Economist.com

Management in Europe | Pay slips | Economist.comNice article on CEO pay from the Economist. The nutshell:"The secret to sensible pay is transparency and a shareholder vote, along with all the negotiation that surrounds it....Ideally, the debate over executive pay will shift from the purely moral plane to the pragmatic one, where it really belongs. Investors and workers want their companies to

Call for papers

NABET: "The Northeastern Association of Business, Economics and Technology invites papers for presentation at its Annual Meeting to be held on October 25th and 26th at the Days Inn, State College, PA."Hey it is State College! :)

Senate Report on Amaranth Advisors

Given the news of Bear Stearns' hedge fund troubles, it is ironically coincidentally that the Senate's report on the collapse of Amaranth Advisors was released today.A look around at some of the reporting:From NY Times' Dealbook:"After a nine-month investigation, a bipartisan Senate subcommittee is expected to issue a report Monday detailing how a single hedge fund, Amaranth Advisors , dominated

Look who is in the news--Myron Scholes

Bloomberg.com: Japan: "Myron Scholes, who won a Nobel prize for developing the model used to value options, is seeking a license to advise Japanese pension funds after opening an office in the country.``We have an application in to Japanese regulators for a discretionary fund management license to enable us to allocate pension fund money in our fund or other alternative investments,'' Scholes, 65

Bear lends $3.2b to its troubled hedge fund

In what will no doubt be talked about in finance classes for years to come, the big news story today is that Bear Stearns has agreed to lend $3.2 Billion (about 25% (I did not verify this reported number) of its overall capital) to one of its troubled hedge funds.First the reports:Bear Stearns to Bail Out Troubled Fund - New York Times: "Bear Stearns, the investment bank, said today that it would

Cadbury expects to sell U.S. beverages unit, plans 7,500 job cuts - MarketWatch

Not sure what to teach? Looking for a good (free case study)? Here you go. This would make a GREAT classroom discussion for a corporate finance class.Cadbury expects to sell U.S. beverages unit, plans 7,500 job cuts - MarketWatch: "Cadbury Schweppes said Tuesday that it sees a sale of its U.S. beverage unit, rather than a demerger, as the most likely option as the world's biggest confectioner

CEO's words haunt Whole Foods deal

TheDeal.com - CEO's words haunt Whole Foods deal: "Court documents released Tuesday, June 19, capture Whole Foods Market Inc.'s CEO John Mackey urging his board to snap up rival Wild Oats Markets Inc. to eliminate any threat from a rival natural foods company.... The FTC's complaint states that 'Mackey bluntly advised his board of directors of the purpose of this acquisition: 'By buying [Wild

SSRN-Earnings Forecast Performance and Financial Analyst Turnover During Mergers by Joanna Wu, Amy Zang

SSRN-Earnings Forecast Performance and Financial Analyst Turnover During Mergers by Joanna Wu, Amy Zang:Super short version: Following mergers, turnover is likely to be a non-linear function of job performance. Specifically, following mergers both poor and good performers are more likely to leave.Longer version: Wu and Zang examine analyst turnover and"...document a U-shaped relation between

Not stictly finance, but I will bend the rules for such a good cause!

Roswell Park Alliance Foundation:Ok, so it is not a hurricane or tornado, but more people die from cancer than all the hurricanes and tornadoes combined! We can help make a small dent in this by helping the Cancer society. Money will be used to find a cure and to help those with cancer.Here's the deal: I will ride 100k (62+ miles) if you donate!It is this week however, so do it now. Donate

CEOs' worth increases even when poor acquisitions are made

CEOs' worth increases even when poor acquisitions are made: "Following an acquisition of another company, chief executive officers' compensation levels usually increase, even when the purchase turns out to be unprofitable, according to researchers at the University of Washington and University of British Columbia. That's because while a bad merger can decrease the value of a company's stock and

Dinosaurs are alive, on Wall Street - MarketWatch

After the 1980s everyone thought conglomerates (like dinosaurs) were dead. But as David Weidner points out, today's private equity firms are essentially conglomerates.Dinosaurs are alive, on Wall Street - MarketWatch: "Private equity companies are ...buying into every industry, including those where they have little or no experience in managing. TA Associates began a technology focused firm, ...

Back to blogging!

Ok, I needed a break! lol...took a few days off (much riding and running) and am now getting back to finance :)So a few news stories of note:1. Yahoo has been under criticism for executive pay. About a third of shareholders refused to vote for all of management's board recommendations. (Stay tuned, this one may not be done.)2. If you ever get thinking that people (including managers) are not

Benefiting from Irrational Investors — HBS Working Knowledge

Behavioral Finance—Benefiting from Irrational Investors — HBS Working Knowledge:Quoting Malcom Baker of Harvard: "'At the foundation of finance is the idea that investors and managers act rationally, so that capital market prices reflect fundamentals and managers respond to incentives in predictable ways,'...But investors don't act like computers in financial models. Behavioral finance replaces

Big or small? Which is better?

Do you live in an area where politicians fight to attract new large firms to the area? Or have you read that small firms have been the main job creators over the past few decades?If you said yes to either, then you should read The Role of Small and Large Business in Economic Development by Kelly Edmiston of the KC Fed. A few look-ins:* " The attribution of the bulk of new job creation to small

FTC to try to block grocer's acquisition

FTC to try to block grocer's acquisition: "Natural foods grocer Wild Oats Market Inc. said Tuesday that federal regulators will file a lawsuit to prevent its acquisition by competitor Whole Foods Market Inc...Whole Foods has said the FTC is considering trying to prevent the sale from being completed over concerns over anticompetitive effects."That is sort of surprising to me. First of all it is

Few fast posts

I never seem to have enough time in the day but didn't want people to think I dropped off teh face of the earth! So here are a few note worthy posts of recent days:Science Daily reports an interesting finding:"...according to a new study in this month's Journal of Personality and Social Psychology, published by the American Psychological Association (APA), repeated exposure to one person's

Are rising costs and regulations detering public equity sales?

Short Version: more firms are choosing to sell public equity in Europe than in US. Is it because of increased regulations? Maybe. No doubt they play a role.Bloomberg.com: Exclusive: "Fees in Europe range from 1 percent ...5.4 percent... Underwriting fees for more than half of the deals in Europe are undisclosed...By comparison, 71 of the 111 initial stock sales on U.S. exchanges this year

PMI vs PiggyBacking

Another financing option lures home buyers: PMI - OregonLive.com: "Home buyers who can't come up with a 20-percent down payment -- and at today's real estate prices it can be a stretch -- must buy private mortgage insurance, or PMI, to guarantee that the lender will be reimbursed if the buyer defaults on the loan.But in recent years, buyers have been circumventing the requirement by paying less

How much can you expect to make on Wall Street?

Wall Street Ren - Career: "Trader Monthly/Options Group2006 Wall Street Bonus Survey"Thanks to Anonymous! (S)he left a comment with this link and it was too interesting not to highlight!

Breaking the Silence on Finance - New York Times

Breaking the Silence on Finance - New York Times"People talk about their sex life and their kids and you can open up and share about your past and mistakes you’ve made, and that’s always a catharsis and is emotionally and spiritually freeing,”... “But people don’t want to talk about their money.”What are we afraid of? One concern is that we will be branded failures. When we were living in caves,

Goldman and the NASDAQ plan "private" markets

First the news: Goldman Sachs the latest to offer unregistered trades - May. 24, 2007:"Top IPO underwriter Goldman Sachs Group Inc. this week launched a platform allowing an exclusive club of big investors to trade unregistered, privately placed securities, in the latest challenge to U.S. equity markets.Private placements have become a big deal on Wall Street, another alternative for companies

Update on some things we covered in class

Updates on Home Depot, Adelphia, and the XM/Sirius potential merger:* Home Depot had their annual meeting and it was quite a change from last year's! The new CEO made a point to be more open! From the NY Times: "Frank Blake confronted the past, saying he regretted last year’s now infamous annual meeting, when members of the board stayed home and his predecessor, Robert L. Nardelli, refused to

Ideoblog: The first exchange-listed law firm

I guess more note revamping is in the works. From Ideoblog: The first exchange-listed law firm: "Slater & Gordon Ltd . . . became the first law firm in the world to list on a stock exchange on Monday. Already the firm's principals along with initial investors have booked a princely premium with the stock closing at $1.40, after gaining 40 cents on the initial public offer (IPO) price."Law firms

Corporate Governance Blog: International Poison Pills

Stephen Deane at the Corporate Governance Blog has a very interesting article on the growing use of poison pills (not that kind!) in Japan and France. Institutional Shareholder Services -- Corporate Governance Blog: ISS Releases New Report on Poison Pills in Japan, U.S., Canada and FranceSubmitted by: Stephen Deane, Director, ISS Center for Corporate Governance: "Even as takeover barriers are

What's going on? A look around

I should be working on a paper (have three in various stages but am sick of all three, so a quick update on things and a look around (much like the old newsletter).The Blogging World and other NewsIn the most important blog article of the week, at the Financial Rounds the UnknownProfessor announced the good news on his son who is cancer free! Less important he also has a really cool group of

Some summer reading

With the end of classes, comes summer reading/ristening. So I figured I would share some of those books either started (I generally have 4 or 5 going at once.)A Guide to Equity Index Construction by Daniel Broby. Good stuff. Will definitely be used in class next semester!A Behavioral Approach to Asset Pricing by Harsh Shefrin. This one has been on by "to-read" list for a while. teaching SIMM

Rules change, behaviors change: a NASCAR example

People maximize their own utility and react to rules changes. This simple idea (which really is core to all of economics and finance) is the foundation of every class I teach. So when I get a chance to show this simple idea in practice I am always excited. So much so I can't wait to finish the paper to show you some results.Following the 2003 NASCAR season, officials changed the rules and

I did not know that...

While most of us know what a mutual fund is, FundSavvy does have a col site and some interesting facts that I sure did not know, for instance on their What are Mutual Funds? page:"The popularity of mutual funds may be relatively new but not their origin which dates back to 18th century. Holland saw the origination of mutual funds in 1774 as investment trusts before spreading to Anglo-Saxon

Marketplace: China loosens control on currency — a bit

Baby steps are better than no steps!Marketplace: China loosens control on currency — a bit: "Starting Monday, China will allow its currency to rise or fall 0.5% a day. The limit used to be 0.3%"

Why have investment banks been so profitable? From the Economist

The Economist gives us another great article! This one is on investment banking. Not only does it provide a short history (going back pre-JP Morgan), but also brings us up to date with a look at the current (very profitable) state of investment banking.The alchemists of finance | Economist.com:A relatively long look-in:"Brokerage used to be described as a haulage business, lugging money, as a

SSRN-A Unified Theory of Ten Financial Puzzles by Xavier Gabaix

Just found this while reading through papers for the upcoming Texas Finance Festival and found this by Gabaix (he of larger firms = more CEO pay fame). His new paper is really interesting, a tad challenging, and nothing if not ambitious!In it this important paper potentially explains "a host of puzzles." How big is a host? About 10 accoring to the paper.A portion of the abstract:SSRN-A Unified

NPR : Q&A: The World Bank at a Crossroads

NPR : Q&A: The World Bank at a Crossroads: "The World Bank was founded in 1944, charged with the monumental task of eradicating global poverty. It offers loans to countries that might not otherwise get them. Since its inception, the bank has lent or given $400 billion.Yet critics say the World Bank is a bloated, corrupt organization that has outlived its usefulness."While not ground breaking,

SSRN-The Economics of Islamic Finance and Securitization by Andreas Jobst

SSRN-The Economics of Islamic Finance and Securitization by Andreas Jobst: "Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring

Chrysler deal: Cerberus CEO puts value on privacy - USATODAY.com

Chrysler deal: Cerberus CEO puts value on privacy - USATODAY.com: "In Greek mythology, Cerberus is the three-headed hound that guards the entrance to Hades. But in the early 1990s, Cerberus was more like a junkyard dog, buying the debt of troubled companies, taking control and improving their operations.As Cerberus grew and became more interested in larger companies, Feinberg hired prominent

The Green Children Foundation

I just stumbled upon this on YouTube. The video, while too short, is pretty good. :)"Last year, The Green Children shot a music video in Bangladesh to celebrate the work of Professor Muhammad Yunus, the father of microcredit and founder of The Grameen Bank"The Green Children Foundation: "We believe in the ability of the poor. With the use small loans (microcredit) people all around the world

A look back to the 1987 Stock Market Crash

Almost 20 years ago the stock market lost over 20% in the course of a single day and about 30% over a two week period. Now the Fed's Mark Carlson looks back at the crash in a fascinating history piece.A Brief History of the 1987 Stock Market CrashA quick look in:"The market crash of 1987 is a significant event not just because of the swiftness and severity of the market decline, but also because

Are people really this clueless?

The Buffalo News: Business: "Most Americans — regardless of gender — lack the basics they need to accumulate the money that will be essential for retirement, but more women than men are missing some of the nuts and bolts, according to research by Dartmouth College professor Annamaria Lusardi.In surveys of individuals she found that only 55 percent of workers knew that government bonds provide a

Open-Source vs. Microsoft

Microsoft claims software like Linux violates its patents - May 28, 2007: "...there's a shadow hanging over Linux and other free software, and it's being cast by Microsoft (Charts, Fortune 500). The Redmond behemoth asserts that one reason free software is of such high quality is that it violates more than 200 of Microsoft's patents. And as a mature company facing unfavorable market trends and

SBU's Students in Money Management

WIth Steve Horan gone from SBU, I am taking this under my wings. Which is to say short sell now! But seriously, it will continue to be run by the students. I figured some of you might be interested in the new web site.Students in Money Management: "The St. Bonaventure University Students in Money Management Fund (the Fund) seeks to offer undergraduate students the opportunity to participate in

alfred Chandler

True he was not a finance professor, but he did study the history of finance and helped establish the importance of looking at business history. Harvard's Alfred Chandler dead at 88: "Alfred D. Chandler, Jr., the renowned Pulitzer Prize-winning Harvard Business School historian who founded the field of business history, died on Wednesday, May 9, at Youville Hospital in Cambridge, Mass., at the

An exclusive conversation with Warren Buffett - Charlie Rose

An exclusive conversation with Warren Buffett - Charlie RoseIt doesn't get much more interesting than listening to Buffett talk.

Where are the shareholders' mansions? CEOs' home purchases, stock sales, and subsequent company performance - Knowledge@W. P. Carey

Short version: bigger house, smaller returns.The "why" may still out there, but interesting finding! Where are the shareholders' mansions? CEOs' home purchases, stock sales, and subsequent company performance - Knowledge@W. P. Carey: "In a new study, W. P. Carey finance professor Crocker Liu, director of the school's Center for Real Estate Theory and Practice, and David Yermack, professor of

Assistant professor of Finance at Simon School and still in teens?

From the Australian: "TWO Russian-born sisters are due to become assistant professors of finance in New York later this year, at the tender ages of 19 and 21, university officials said.Angela Kniazeva and her younger sister Diana were due to take up their new positions in September at the University of Rochester, where half of their students will likely be older than them.The pair, who already

Buffett: Index funds better for most investors | Reuters

Buffett: Index funds better for most investors | Reuters: "Warren Buffett said on Sunday most investors are better off putting their money in low-cost index funds, though he believes he can still outperform major market indexes.'A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,' Buffett said at a press conference, a day after the

Interesting stat on Dow

CNNMoney.com Market Report - May. 4, 2007: "The Dow has now risen in 23 of the last 26 sessions, marking its longest bull run since the summer of 1927, when the indicator ended higher in 24 of 27 sessions, according to Dow Jones."

Congratulations Eric Lie!

press-citizen.com | Local News: "University of Iowa finance professor Erik Lie has been named one of the world's most influential people by Time magazine....In the overall list, Lie is included with other notables that include Oprah Winfrey, George Clooney, Roger Federer, Tony Dungy, Nancy Pelosi, Hillary Clinton, John Roberts, Pope Benedict XVI, Al Gore, Elizabeth Edwards, Condolezza Rice and

Chavez threatens to nationalize banks, steel producer

He just does not get it. And he wonders why the economy is so messed up!globeandmail.com: Chavez threatens to nationalize banks, steel producer: "Venezuelan President Hugo Chavez on Thursday threatened to nationalize the country's banks and largest steel producer, accusing them of unscrupulous practices.“Private banks have to give priority to financing the industrial sectors of Venezuela at low

Three Quick sports stories

Three sports stories of this week definitely had some overlap to business, economics, and Finance.a. The first round of the NFL draft was the longest (measure by time) in history. Many announcers and reporters mentioned it but none (that I saw at least) correctly explained why-- you do not exercise an option early. Why? Consider the following. Suppose you are drafting 12th and have your heart

National Bankrutpcy debate?

Want to start a debate? Bring up the idea of national bankruptcy.For instance James Kazoun writes over at ArabicNew.com thatIraq and Lebanon should declare bankruptcy: "I am not aware of any such bankruptcy laws for countries, but there should be one as well. But in such absence, setting precedence should do it. Now that Iraq supposedly have a democratic government, this government should

Cheating at Duke

As a reminder to everyone doing finals, DON'T CHEAT!!From Business Week:"....school officials said that Duke is taking disciplinary action against 34 of the school's first-year MBA students—almost 10% of the school's 2008 class—for allegedly cheating on an open-book, take-home final in one of the school's required core classes. It is the largest episode of cheating in the school's history,

A look around

Almost in the spirit of the old FP newsletter, here is a quick look at some news stories etc that I think you might be interested. No time to go into great detail..sorry!CNN/Fortune have a good interview with Lee Iacocca. In it he talks about why the Chrysler-Daimler merger failed, on his fear of private equity, and even on the workout habits of the 90 year old Kirk Kerkorian. "While subprime

More on microfinance

How some people can not be excited about finance is beyond me. If you can't watch the whole thing, minimally watch between the 19-21 minute section or the 23 to 25 minute section and tell me how finance gets a bad name when it helps so many!

Last class, first graduation address..

It is that time of year again. The time of mixed emotions. On one hand I want to congratulate the graduates, but simultaneously say that I will miss you. Please stay in contact!In class last night I mentioned the following post. It is an an oldie but a goody. I originally wrote it back in December of 2004. I just reread it and still think it hits the main points very well. Read it. :)

The Global Impact of Islamic Finance - News

The Global Impact of Islamic Finance - News: "Hayes was a principal contributor to the Harvard Islamic Investment Study and the author of seven books, including Islamic Law and Finance.Hayes, the first speaker of the panel, explained basic concepts and principles of Islamic Finance to the audience. Islamic Finance refers to a system of finance or banking that is consistent with Islamic law (

Bloomberg.com: Worldwide

Bloomberg.com: Worldwide: "The U.S. Securities and Exchange Commission filed a lawsuit against two former Apple Inc. top executives for their roles in backdating stock-option grants, including some made to Chief Executive Officer Steve Jobs.Former Apple General Counsel Nancy Heinen's lawyers have said she'll fight the case. The SEC settled with former Chief Financial Officer Fred Anderson. He

How good of hedge is gold?

Market.view | A fine and fickle friend | Economist.com: "A recent paper...attempts to answer this question—or, rather, it attempts to answer two questions. Does gold usually move in the same direction as shares or government bonds? (In other words, is it a hedge in normal times?) And does gold move in the opposite direction when shares or bonds are falling sharply? (Is it a safe haven in extreme

Oxley: I'm Not Happy with Sarbox - - CFO.com

Oxley: I'm Not Happy with Sarbox - - CFO.com: "Section 404, which requires companies and their auditors to examine and report on the processes behind their financial reporting, quickly became the most expensive and hated provision of the act.Today, Sarbox, and particularly 404, are under heavy attack, as are many of its accessory creations, most notably the Public Company Accounting Oversight

MicroCredit on PBS

Want to see how finance can make the world even better? The local PBS channel (WNED) just aired a show on how microcredit is helping the people of Uganda. Good stuff. Definitely class worthy!"Microcredit is not new. It's been around in one form or another for hundreds of years. But in the Information Age, a San Francisco company has taken the idea of microfinance and upgraded it for the Web.

Not finance, but important :)

Since this blog has more readers than the BonaReponds blog, I will cross list this just this once ;) (it also explains what I do with the rest of my "free time". LOL..First a video: (links to others of are videos are here)And then the real reason for the post--We need volunteers!! So if you are in the WNY area, come on out! (of course if you are not and would like to donate, you can do that too

Ten tips from Bob Thompson

BCNG Portals Page: "Tip of the WeekI have pulled this information from AIM Trimark Investments, as they provide a good summary of the dos and don’ts of building your portfolio. Of course, each of the following can be explained in further detail.Top 10 tips for investors1) Don’t try to time the market.2) Keep tax consequences in mind.3) Set up a regular contribution plan.4) Start saving as early

MBA or CFA?

Monster.com has two interesting articles that will especially interest students.On is on getting an MBA.How an MBA can help you: "Credibility. Confidence. A big-picture perspective. Appreciation for other points of view. That's what MBAs say when asked what the degree has done for them.'It gave me a broad perspective of the business world. How the economy works [and] how my industry works,' says

SSRN-Control Rights and Capital Structure: an Empirical Investigation by Michael Roberts, Amir Sufi

SSRN-Control Rights and Capital Structure: an Empirical Investigation by Michael Roberts, Amir Sufi:Roberts and Sufi show that "financing decisions of solvent firms are dictated by creditors...."More specifically they show that following a covenant violation, creditors exercise some of their power and limit further debt issuances. (Of course this is not surprising, but still always good to see

A Brief History of Derivatives

Prepping for class I stumbled upon this. It is grear! LOL...A Brief History of Derivatives: "To start we need to go back to the Bible. In Genesis Chapter 29, believed to be about the year 1700 B.C., Jacob purchased an option costing him seven years of labor that granted him the right to marry Laban's daughter Rachel. His prospective father-in-law, however, reneged, perhaps making this not only

Islamic Finance

Business Times: "Malik said the 21st century is seeing so much political conflict between Islam and the West, yet in the field of Islamic finance, the West has embraced it with open arms.The UK, for instance, recently introduced new legislation to promote Islamic finance, particularly Islamic bonds or sukuk."

Bloomberg.com: Exclusive

Bloomberg.com: Exclusive: "Which approach is best, active or passive investing, is a never-ending debate on Wall Street, where passive indexers such as DFA and Vanguard Group Inc. are the antithesis of celebrity stock pickers. If there's any criticism of indexing, it's that as goes the market, so go the indexes, which can lead to losses unless an investor also invests in active funds to mitigate

SSRN-Operating Under a Liquidity Crunch: The Impact of LBOs on Product Availability in the Supermarket Industry by David Matsa

SSRN-Operating Under a Liquidity Crunch: The Impact of LBOs on Product Availability in the Supermarket Industry by David Matsa: "The structure of financing can impact a firm's operations in important ways. This paper examines how leveraged buyouts affect a supermarket's provision of product availability -- an important dimension of quality in the retail sector. Using U.S. consumer price index

What a great way to spend some free time!

Damodaran Online: Home Page for Aswath Damodaran-Of course I have seen this site before but just adopted his book for a fall class (SIMM for those of you at SBU) and got playing around on his site. It is even better than I remember! GREAT STUFF!!

Are Hedge Funds out of Control? - Knowledge@Wharton

Here is a great podcast interview with Andrew Metrick of Wharton. You can either risten or read it as the transcript is available. The first part of the interview is about his book and valuation (my favorite line, which fits perfectly with our classes):"I think, actually, a lot of that is more the art of being a great venture capitalist than it is the science"The latter part of the interview

A MUST READ ON EMH!!

Massey News Article - New take on predicting stock market returns: "...a study by finance Professor Ben Jacobsen, has spread rapidly around the finance community. Professor Jacobsen, and his associates, have reported that conclusions on stock market return predictability vary drastically when the timeframes of observation are altered.They say forecasts will vary, for example, if they are based on

Wal-Mart pulls bank application | Reuters.co.uk

Well that did not last very long!Wal-Mart pulls bank application | Reuters.co.uk: "Wal-Mart Stores (WMT.N: Quote, Profile , Research) said on Friday it has withdrawn its request to open a specialty bank after immense opposition from politicians, consumer groups and community banks hampered its application with U.S. bank regulators.'Since the approval process is now likely to take years rather

Wal-Mart blasted by congressman

Wal-Mart blasted by congressman: "Wal-Mart Stores Inc. may be eyeing a larger role in banking than it has previously disclosed, according to lease details made public Thursday by a congressman who accused the world's largest retailer of hiding plans to become a retail bank."I have a tough time being surprised by this.

Short-term CFOs Equal Short-term Planning - - CFO.com

Managers and shareholders often disagree about the timing 0f projects. We have long argued that managers are much more myopic than are shareholders. This supports that:Short-term CFOs Equal Short-term Planning - - CFO.com: "An overwhelming majority — 87.6 percent — of finance chiefs reported that companies have shortened the payoff horizons of their investment decisions to coincide with the

The SEC Is Eyeing Insider Stock Sales

The SEC Is Eyeing Insider Stock Sales: "The SEC's goal in creating automatic trading plans was to allow executives to sell shares without triggering insider trading charges. To gain that legal 'safe harbor,' however, executives must meet certain conditions. They must set up a trading plan when they don't know of any significant nonpublic information, lay out the dates or prices at which trades

Bats

With spring training well underway, what better time to bring up bats?From the Buffalo News:"Bats Trading, an upstart electronic trading system hundreds of miles away in Kansas City, said it handled the volatility with none of the glitches that others did. Bats has quickly become the third-largest stock trader by volume, trailing only the NYSE and Nasdaq Stock Market, thanks to its technology and

Backdating takes another "victim"

from CFO.com"Cirrus Logic, a maker of audio and video chips, announced that David D. French has resigned as president and chief executive officer and as a director after an internal review determined that he was aware of possible backdating of stock option grants...."

NYSE continues to mop up from glitches

From BusinessWeek:NYSE continues to mop up from glitches: "The New York Stock Exchange on Wednesday continued its mop-up from the technical glitches that bottlenecked its trading system and triggered a temporary shutdown of electronic transactions during Tuesday's market plunge.The Big Board requested that specialist firms -- which match buyers and sellers -- keep their stock posts open after the

BBC NEWS | Business | Is Sainsbury's set to be taken over?

I love grocery stores and we just covered leasing in my Problems in Finance Class, so I couldn't pass this one up:BBC NEWS | Business | Is Sainsbury's set to be taken over?: "While it has not revealed any details of its proposed plans, retail analysts agree that the consortium has its eyes on the property value of the Sainsbury's stores, which are often located in city centres where commercial

Dow Jones Indexes sees glitch-free Dow calculation | Reuters

Dow Jones Indexes sees glitch-free Dow calculation | Reuters: "With an hour left to trade, the Dow Jones industrial average fell more than 500 points as it abruptly added about 200 points to its slide in late afternoon trade on Tuesday.According to Dow Jones Indexes, 'unusually heavy volume' caused a 70-minute lag in correctly calculating the value of the Dow and the subsequent downward spike in

What happens when the private equity buyout boom ends - Feb. 26, 2007

CNN has an interesting look at private equity's role in recent buyout boom. (The video is good introduction)What happens when the private equity buyout boom ends - Feb. 26, 2007: "Utility firm TXU Corp. (Charts) said Monday it agreed to be bought by Kohlberg Kravis Roberts, Texas Pacific Group and the private equity arm of Goldman Sachs (Charts) for $32 billion, or nearly $45 billion including

Shareholders in Japanese Steel Maker Block a Merger Deal - New York Times

Score one for investors!Shareholders in Japanese Steel Maker Block a Merger Deal - New York Times: "Shareholders of the Tokyo Kohtetsu Company blocked a takeover on Thursday by a rival steel producer, the Osaka Steel Company, the first time in Japan that shareholders have vetoed a merger approved by the companies’ boards.An investment fund, Ichigo Asset Management, started a rare proxy fight

A few interesting news stories

The Slow Pace of Justice on Options Backdating - New York Times: "A sweeping investigation into the backdating of stock options at more than 100 companies has so far led to relatively few enforcement actions or resolutions.Lawyers and executives at the companies under scrutiny have been waiting to see how investigations by the Securities and Exchange Commission, as well as those by United States

Father and CFO of His Country? - Finance - CFO.com

CFO.com has a fun article on George Washington.Father and CFO of His Country? - Finance - CFO.com: "Washington 'took great pride in maintaining clear, concise, and accurate [financial] records,' notes the Library of Congress's guide to the material. Indeed, at the end of the war, Washington used those expense accounts to request reimbursement from Congress for his total expenses of $160,074. That

SSRN-Migration by Eugene Fama, Kenneth French

WOW. I will have to do a longer review of this when I get time, BUT WOW--explanations of both size effect and value anomaly? SSRN-Migration by Eugene Fama, Kenneth French: " Abstract: "We study how migration of firms across size and value portfolios contributes to the size and value premiums in average stock returns. The size premium is almost entirely due to the small stocks that earn extreme

Zvi Bodie on insurance, retirement, and saving too much!

Saving for a rainy day is one thing, but insurance may be a much more efficient way. Listen to an interview with Zvi Bodie from PRI's Here and Now.Here and Now : 2/20/2007: "Professor Says Cut Back on Retirement Savings---Zvi Bodie, a professor of finance and economics at Boston University, says Americans are saving too much for retirement ."

Southern Finance Association

From Southern Finance Association:" Southern Finance Association 2007 Annual Meetings November 14 - 17, 2007 Charleston Place Hotel Charleston, SC The SFA paper submission deadline is only about two weeks away! Please go to the website and submit your papers along with volunteering for the Program Committee. After sessions are formed, you may also volunteer to discuss

Bloomberg.com: U.S.

Bloomberg.com: U.S.: "Sirius Satellite Radio Inc.'s agreement to buy rival XM Satellite Radio Holdings Inc. for $4.57 billion in stock is a bet that U.S. regulators will alter rules that bar the only two pay-radio companies from combining.Shares of XM may rise on the agreement, announced yesterday when U.S. markets were closed for a holiday. The terms value Washington-based XM at $17.02 a share,

Jury duty

How can it be that in the course of two weeks I get a ticket for supposedly using a cell phone when driving (I WAS NOT!!! I have no idea what the officer was talking about and my phone log shows I was not--the officer said I might have two cell phones? please search my car--but she would not) AND have jury duty. LOL....so I had to cancel day classes tomorrow. Stay tuned.

Chávez Threatens to Jail Price Control Violators - New York Times

This guy needs an economist in the worst way!!Chávez Threatens to Jail Price Control Violators - New York Times: "Faced with an accelerating inflation rate and shortages of basic foods like beef, chicken and milk, President Hugo Chávez has threatened to jail grocery store owners and nationalize their businesses if they violate the country’s expanding price controls.Food producers and economists

A Good Word for Hedge Fund Activism - New York Times

A Good Word for Hedge Fund Activism - New York Times: "...the evidence shows that for the most part, buy-and-hold investors ought to cheer when hedge funds jump aggressively into a stock, according to a new study. Titled “Hedge Fund Activism, Corporate Governance and Firm Performance,” it was written by Alon Brav, a finance professor at Duke; Wei Jiang, an associate professor of finance and

SSRN-How Do Shareholders Respond to Downsizing? A Meta-Analysis by Gunther Capelle-Blancard, Nicolas Couderc

May try to comment on this one in a bit, but a friend sent it to me and it is an interesting look at whether downsizing is bad or not. The authors find there to be a negative reaction to the news. Why? Most likely because it signals that conditions within the firm are not very good.SSRN-How Do Shareholders Respond to Downsizing? A Meta-Analysis by Gunther Capelle-Blancard, Nicolas Couderc: "..

A look at decision markets

Recently we talked about decision markets in class. Here is a NY Times article on the same:Odds Are, They’ll Know ’08 Winner - New York Times: "Over the last few years, Intrade — with headquarters in Dublin, where the gambling laws are loose — has become the biggest success story among a new crop of prediction markets. Another company, Newsfutures, helps the world's largest steel maker, Arcelor

Quick link round-up

Super fast look around at some blogs I have been following:FreeMoneyFinance comments on an article by Ben Stein that looks at the relative returns of real estate to stocks. Short version: stocks have done better historically than real estate but it is really hard to live in a stock. "There are long periods when the stock market doesn't make you much money.The S&P is still lower than it was seven

IPOs following going private transactions

First some background: As private equity has grown in importance, there have been many more deals where publicly traded firms are bought out and taken private (so their shares no longer trade publicly). Then after a while, the the firms are often resold to the public. The following NY Times article deals with whether or not investors should be buying when this "smart money" is selling.Should You

Fortress' IPO

In a "must talk about case" for all of my classes, Fortress went public today.Who is Fortress? From Marketwatch: "Fortress Investment Group -- not a hedge fund -- but a nine-year-old company that runs hedge funds."First the facts:From Business Week: Investors Storm Fortress IPO:"In the most widely anticipated public offering of the young year, FortressInvestment Group (FIG), the first U.S.-based

Investment Ethics: Course explores dollars, decency

Marquette has started an Investment Ethics course. The Milwaukee Journal Sentinel covered reported on the class yesterday.JS Online: Course explores dollars, decency: "'Ethics in finance is a trifle specialized, especially at the undergraduate level,' says John Boatright, a professor of business ethics at Loyola University in Chicago and author of the text 'Ethics in Finance.' 'At the

Still more on pay gaps

More on the pay gap from NPRShort version: while the pay gap gets much bad publicity, it is not entirely bad. The gap helps create incentives to work harder and get more education. Moreover, the gap is not some conspiracy, but rather brought about by some of the same forces (technology being paramount) that we see at work in large chain retail stores (the CEO of a large chain will get much more

www.exduco.net - Graduate schools and programs guide

I knew the NYSE was closed in 1914 for WWI but never knew any of the story behind it. So on the chance that you did not know it either: www.exduco.net - Graduate schools and programs guide: "William L. Silber, Marcus Nadler Professor of Finance and Economics at NYU Stern, who earlier served as a senior economist with the President’s Council of Economic Advisors and as a member of the Economic

More on "pay Gaps"

Wow, pay gaps are a hot topic all of a sudden! Today Fed Chairman Ben Bernanke gave a speech on the issue. The text of the speech is here.Some Look-is:* "Although we Americans strive to provide equality of economic opportunity, we do not guarantee equality of economic outcomes, nor should we. Indeed, without the possibility of unequal outcomes tied to differences in effort and skill, the

Shriekers seek 'Idol' acclaim - USATODAY.com

Ok, so the American Idol appears to have zero to do with finance (so much so I have NEVER watched a single episode, but I stumbled upon this in USATODAY and it does have a tie to behavioral finance--specifically some of the singers seem to have the same overconfidence that can negatively impact investors who trade frequently. Shriekers seek 'Idol' acclaim - USATODAY.com: "many singers don't know

JOKE!!! THIS IS A JOKE!

Hilarious...in the spirit of the Onion.comThe Tuck Profit: "After 15 years of sharing the credit for groundbreaking research with Ken French, Eugene Fama is on a mission to expose his former colleague, and himself. The result is an alarming behind-the-scenes look at how academic careers are made and broken."HT FinancialRounds for this one!

Home Depot Proxy Fight Is Settled - New York Times

Home Depot Proxy Fight Is Settled - New York Times: "Home Depot...reached an agreement...with a large shareholder, Relational Investors, that will prevent a proxy fight over the company’s strategy.In return, the shareholder, Relational, a San Diego investment fund, will receive a seat on the company’s board and four directors involved in hiring Robert L. Nardelli, the recently dismissed chief

S.E.C. Is Looking at Stock Trading - New York Times

S.E.C. Is Looking at Stock Trading - New York Times: "The Securities and Exchange Commission has begun a broad examination into whether Wall Street bank employees are leaking information about big trades to favored clients, like hedge funds, in an effort to curry favor with those clients, executives at Wall Street banks said.The inquiry, these people said, seems aimed at determining how pervasive

A look around at a few weekend news items

For those of you so caught up in the Super Bowl you missed reading the Business pages this weekend, here are a few highlights:Earnings-based strategy has high risk factor | Chicago Tribune: "A study by University of Illinois finance professor Allen Poteshman for the 10 years through May 2000 showed that there's a particular danger in holding growth stocks during the three-day period around an

Article on what not to do when investing

Sometimes knowing what NOT to do shows us what to do. That is the case of Dowling and Lucey's paper entitled The 7 Deadly Sins of Investors. (FTR the target audience is Irish Investors, but their stories and advice are largely universal.A few quick look-ins:"In March 1999, an internet company called AppNet Systems....stated that the company would soon float on the stock market. ...investors ...

Kraft carveout and spin-off

This is a great one for class! Not only does the article discuss the carve-out and spin-off, but the SF Chronicle piece talks about valuation (including EBITDA multiples!), multiple classes of shares, and socially responsible investing.Definitionscarve-out: IPO of a part of company (In this case this happened in 2001, when Kraft began trading publicly. Altria (the parent who some still call

Bloomberg.com: Exclusive

Bloomberg.com: Exclusive: "[The hedge fund managers] hunt for market variables called risk factors that often lead to excess investment returns, or premiums, according to people familiar with the fund.Some, such as a measure called the value premium -- the difference between the return of a group of stocks with high book values relative to their prices and that of a group with low book

Common Clues Of Financial Statement Manipulation

Teaching accounting in a finance class is always difficult, but article like this will be of interest to the students and a good way for all to get some practical applications of what to be aware of when examining financial statements.From Investopedia:Common Clues Of Financial Statement Manipulation: "One of the most prevalent approaches to corporate accounting is to omit the bad and exaggerate

Bush Backs Linking of Executive Pay and Performance - New York Times

Bush Backs Linking of Executive Pay and Performance - New York Times: "President Bush took aim Wednesday at lavish salaries and bonuses for corporate executives, standing on Wall Street to issue a sharp warning for corporate boards to 'step up to their responsibilities' and tie compensation packages to performance.... He said some workers are being left behind in the booming economy and the

New York and Tokyo Stock Exchanges Announce Alliance - New York Times

From the NY Times: New York and Tokyo Stock Exchanges Announce Alliance - New York Times: "The New York Stock Exchange and Tokyo Stock Exchange announced an alliance Wednesday that extends the NYSE's global reach and could lead to an eventual combination of the world's two largest financial markets....allows the two stock markets to cooperate on joint developments such as financial products,

A Small B-School Can Be a Big Plus

SBU scores well on this!! From BusinessWeekA Small B-School Can Be a Big Plus: ""So what, exactly, is the small school advantage? In a word: community. Students say it's easier to form close bonds with classmates at a small school like Tuck or UNC's Kenan-Flagler, where each graduating class is kept to under 300 people, compared with larger ones like Harvard and Wharton, where the graduating

Not academic and not even that good but it is interesting to read and the conclusion is pretty good: i.e. passive and automatic investing wins out in the end! From FoxNews Short version: Quantitative analysis, which limits impact of behavioral finance's impact, is catching on and indexing seems to be better way to go than stock picking (nothing new with that!)Two look-ins:"Behavioral Finance,

The Thinkers: He brings higher mathematics to bear on high finance

The Thinkers: He brings higher mathematics to bear on high finance: ""It's called stochastic calculus, a branch of mathematics that measures what happens in any system that is beset by random fluctuations.Dr. Shreve, the Orion Hoch Professor of Mathematics at Carnegie Mellon University, does research into both the convertible bond and YouTube problems."How could any pass up an article that has

Davos 2007 - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

A couple of follow ups on previous stories:Two recaps from Davos:1. Davos 2007 - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times: "The five-day event, meant to generate discussion of major global issues, featured dozens of panel sessions, nonstop networking among its high-powered attendees and, for those tired of such serious fare, a long list of private parties"2

Financial Engineering News - January/February 2007

Looking for a finance-ethics case for class? Or just trying to learn more about what happened at HP? Financial Engineering News has you covered!Financial Engineering News - January/February 2007:A few quick look-ins:"Even after Fiorina's victory on the merger and proxy challenges, the HP board continually heard complaints from employees and officers about Fiorina's autocratic style, her

Helping revive free trade

Yeah! Good news from Davos!!Helping revive free trade | The Courier-Mail: "MAJOR world powers have agreed to resume global free trade talks suspended six months ago amid deep divisions over farm subsidies between the US and the European Union.Australian Trade Minister Warren Truss said the breakthrough at a meeting on the sidelines of the World Economic Forum in Davos, Switzerland, meant there

Author interview | Economist.com

Author interview | Economist.com: "A discussion with Edward Carr, Business Affairs Editor of The Economist“Median pay for executives is around $7m per year. That's a lot of money, but not that much when you compare it with people in similar professions—lawyers, traders, hedge fund managers. They've actually outpaced executives. If you look at executive pay in the context of other high-flyers, it

Cool! Milton Friedman day!!

From Jeff:"I am writing to you because I thought you and your blog readers might appreciate hearing about this. “Milton Friedman Day” will be celebrated next Monday, January 29 and The Economist will pay tribute to the famous and highly influential economist by hosting an online discussion with prominent economists and officials such as Leo Melamed, Ben Stein and California Governor Arnold

Big Deal(s): What's Driving the M&A Frenzy? - Knowledge@Wharton

Knowledge at Wahrton does its usual great job this month. The highlight? A look at the takeover market. GREAT stuff:Big Deal(s): What's Driving the M&A Frenzy? - Knowledge@Wharton: "2006 set a record for mergers and acquisitions worldwide. Deals totaled $3.79 trillion, 38% higher than in 2005, and 55 of the transactions were valued at more than $10 billion each, according to data from Thomson

Media-Newswire.com - Press Release Distribution - PR Agency

Note to self: add Fama-efficient to vocabulary!Media-Newswire.com - Press Release Distribution - PR Agency: "Nobel prize winner Professor Robert Engle, New York University, will discuss Generating Return on Capital in a ‘Fama-Efficient’ World with Fabrizio Gallo and Robert Ferstenberg from Morgan Stanley in a public event at LSE on Tuesday 30 January. The equity investment management business has

Winston-Salem Journal | NOT A BAD BET: Vice Fund's returns indicate that people are always going to drink, smoke and gamble

Winston-Salem Journal | NOT A BAD BET: Vice Fund's returns indicate that people are always going to drink, smoke and gamble: "Vice can be nice when it comes to the investment returns of a mutual fund that counts on consumers to smoke, drink or gamble in good and bad economic times.But analysts caution that the Vice Fund has benefited from good economic timing since its inception in August 2002

The Chronicle, 1/19/2007: Sales Go Up $6 for Every $1 Companies Add to Giving Budgets, Report Says

So reputation DOES matter and being nice pays off! have to admit the numbers surprise me. I will have to read the actual study!The Chronicle, 1/19/2007: Sales Go Up $6 for Every $1 Companies Add to Giving Budgets, Report Says: "For every new dollar a retail company, bank, or popular-goods manufacturerallocates to its charitable-giving budget, it can expect sales to grow onaverage by $6,

Finance & Accounting Jobs - Search Finance Jobs & Careers at Monster.com

With the start of the new semester, many seniors will get more serious about their job search. Monster.com's finance channel is a good starting point! It has tips for resumes, interview questions, and of course openings. Finance & Accounting Jobs - Search Finance Jobs & Careers at Monster.com: "Find out which positions in finance and insurance are at the top of the pay food chain and have the

Welcome back!

After about two weeks with zero internet (working with BonaResponds and Randy's Rangers in Pass Christian Mississippi) classes started this week and I have internet again so I will soon be back to blogging. I have a couple of long overdue reviews to do first, but hopefully by the end of the week it will be business as usual.jim