Fed Proposes Selling Term Deposits to Absorb Excess Reserves - BusinessWeek

In "open-market transactions" the Fed buys and sells assets to change the money supply. For instance, if they want to shrink the money supply they will sell something. (selling shrinks the money supply since the banks have to pay money to buy the asset. This in turn reduces the amount of money available to lend out.Now the Fed is considering selling a different type of asset:Fed Proposes

The Intelligent Investor: Golden Pay for CEOs Could Be Bad for Stocks - WSJ.com

The Intelligent Investor: Golden Pay for CEOs Could Be Bad for Stocks - WSJ.com: "The first study, led by corporate-governance expert Lucian Bebchuk of Harvard Law School, looked at more than 2,000 companies to see what share of the total compensation earned by the top five executives went to the CEO. The researchers call this number—which averages about 35%—the 'CEO pay slice.'It turns out that

Keynes and Hayek rap from PBS

This is good. Not every day you can teach economics with rap music.

Thomas Acquinas for market prices from the Mises Institute

An interesting piece on price (which supports supply and demand as being the drivers of price) from Mises.org.As a grocer by birth (I just happen to teach finance ;) ) I have often been puzzled at the idea of price "gouging" after disasters (big or small). A few summers ago we had a power outage. Hence people wanted ice and water. We arranged special deliveries (at an added cost) and sold them at

SSRN-Do Corporate Insiders Prefer Nasdaq? by Stanley Peterburgsky

Interesting take on Rule 144. The rule sets conditions when in the SEC's words there can be Image via Wikipedia "...public resale of restricted and control securities if a number of conditions are met...." included in these conditions is a volume condition: "Trading Volume Formula. If you are an affiliate, the number of equity securities you may sell during any three-month

Epoch Times - Insider Trading on the Rise

Epoch Times - Insider Trading on the Rise: "“The Enron case illustrates one of the most pernicious effects of insider trading: It gives executives a reason to distort reports on corporate performance and find other ways to manipulate markets to their own benefit,” Strudler notes."

SSRN-The Microstructure of the TIPS Market by Michael Fleming, Neel Krishnan

A god article for class! Explains the TIPS market very well. SSRN-The Microstructure of the TIPS Market by Michael Fleming, Neel Krishnan: " We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the

SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang

SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang: "We find that voting with one’s feet is done largely by institutions that have less than 1% ownership in the firm while institutions that hold block levels of ownership at the time of the CEO turnover announcement significantly increase their ownership levels

A Habit of Generosity - WSJ.com

A Habit of Generosity - WSJ.com: "Paul Zak, a neuroeconomist and director of the Center for Neuroeconomics Studies at Claremont Graduate University in Claremont, Calif., has devoted his research to explaining this type of generosity. 'I investigate the biological basis for generosity, focusing on the neuroactive hormone oxytocin,' he says in his blog for Psychology Today. 'Our studies have shown

In IPO Market, Issuers Court Long-Term Buyers - WSJ.com

The WSJ provides more evidence that investors are not the same.In IPO Market, Issuers Court Long-Term Buyers - WSJ.com: "Long-only buyers—those who tend to hold the stock rather than flip it on the first day—have always been critical participants in successful new issues. Mr. Fox added that issuers 'focus less on allocations when every deal is doing well than when they do in a more

French plan to force gender equality on boardrooms | World news | The Guardian

French plan to force gender equality on boardrooms | World news | The Guardian: "In a bill submitted to the French parliament this week, all companies listed on the Paris stock exchange would have to ensure female employees made up 50% of their board members by 2015. If passed, a gradual implementation of the law would see businesses obliged to have women in 20% of board seats within 18 months,

Job growth predicted in financial regulation - washingtonpost.com

Note: if you are surprised even a little at this, shame on you.Job growth predicted in financial regulation - washingtonpost.com: "Financial examiners and compliance officers are expected to be two of the 30 fastest-growing U.S. occupations over the next 10 years, according to a Labor Department report released last week."

Farnam Street: A Dirty Word or a Dirty World? Attribute Framing, Political Affiliation, and Query Theory

Need more proof that framing and how (and not just what) we say matters? Consider the following from Farnam Street:Farnam Street: A Dirty Word or a Dirty World? Attribute Framing, Political Affiliation, and Query Theory: "The main distinction was between a surcharge described as a 'carbon tax' and an identical charge described as a 'carbon offset'.The tax was unpopular - no real surprise. But

UPDATE 7-Cadbury points to rival interest as it rejects Kraft | Reuters

UPDATE 7-Cadbury points to rival interest as it rejects Kraft | Reuters: "Cadbury (CBRY.L) teased shareholders with the prospect of rival bids and promised bigger dividends and stronger growth as it again knocked back a 10 billion pound ($16.2 billion) offer from Kraft Foods (KFT.N)."

Bacteria provide new insights into human decision making

Have a hard time believe I am linking to an article on bacteria for Finance, but it is similar in ways to passive investing. If everyone is doing it, you have an incentive to not do it, but if no one is doing it, you have an incentive to do it.Bacteria provide new insights into human decision making: "'We have developed for the first time a system level model of a large gene network to decipher

Fondo Libre - Visualizing Bank Failures ( 2008-2009 )

Fondo Libre - Visualizing Bank Failures ( 2008-2009 ): "Visualizing Bank Failures ( 2008-2009 ) from Michael J Bommarito II on Vimeo."Visualizing Bank Failures ( 2008-2009 ) from Michael J Bommarito II on Vimeo.

Paul Samuelson, Nobel-Winning Economist, Dies at 94 (Update1) - Bloomberg.com

Paul Samuelson, Nobel-Winning Economist, Dies at 94 (Update1) - Bloomberg.com: "Paul Samuelson, Nobel Prize-winning economist and author of the best-selling economics textbook in history, died today at his home in Belmont, Massachusetts. He was 94."

Hedge Fund Exchange: Women Hedge Fund Managers Outperform Men

Hedge Fund Exchange: Women Hedge Fund Managers Outperform Men: "Women also, apparently, make better money managers according to another study by two professors at UC Davis [3]. That study found that overconfidence caused men to trade stocks 45 percent more often than women, thus lowering their net portfolio returns by 2.65 percent per year (compared with 1.72 percent lower returns for women

Bubble Decade: Technology, Housing, Real Estate, Money, Layoffs, Companies, Unemployment, Internet Pioneers, Business, Markets, Finance - CNBC.com

Bubble Decade: Technology, Housing, Real Estate, Money, Layoffs, Companies, Unemployment, Internet Pioneers, Business, Markets, Finance - CNBC.com: "The sweeping story of the three economic bubbles that defined the decade begins with the tech bubble, its apex marked by AOL’s audacious takeover of Time Warner. The deal signified the heights and hope of the dot-com boom, a chapter that saw the

Top 30 at Goldman Will Get Stock, Not Cash, as Bonus - NYTimes.com

Top 30 at Goldman Will Get Stock, Not Cash, as Bonus - NYTimes.com: "Goldman Sachs announced on Thursday that its top executives would forgo cash bonuses this year and that it would give shareholders a say in determining compensation......While Goldman will give shareholders a say on pay, the bank would not be required to bow to its investors wishes. Still, a vote against Goldman would be deeply

Paper Probes Fed Nightmare — Inflating Away U.S. Debt - Real Time Economics - WSJ

Paper Probes Fed Nightmare — Inflating Away U.S. Debt - Real Time Economics - WSJ: "Some fear that inflating the nation’s debt away is the path of least resistance for political leaders who can’t make the hard choices on taxation and spending....For those who detest inflation–and that’s most economists and policy makers–the bad news comes first. The paper says a review of the U.S. experience

New York Fed to hear new theory on financial meltdown Dec. 8

Anjan Thakor is a financeprofessor from Washington University in St. Louis.New York Fed to hear new theory on financial meltdown "Thakor says it is important to determine the root causes of the financial crisis in order to prevent it from happening again. 'We had this double fragility in the financial system from high borrower and bank leverage....To get at root causes of the current crisis and

Two fast points on the 50% tax on British Bank bonuses

Two fast points on the 50% tax on British Bank bonuses:City tells Darling: your super-tax is pushing us out of Britain | Business | The Guardian: "City minister, Lord Myners, spent this afternoon calling the heads of all major banks in the City to try to reassure them about the tax, which is being introduced immediately, bankers reckoned there would be a race to circumvent the rules by raising

Mexico's oil hedge

Mexico Has Hedged Oil for 2010 at $57 a Barrel (Update2) - Bloomberg.com: "Mexico spent $1.172 billion to buy oil hedges for 2010, covering a possible revenue shortfall if production falls for the sixth straight year and prices don’t recover from about a five-year low.Mexico purchased put options that give it the option, not the obligation, to sell its oil for $57 a barrel next year, the Finance

Steven Colbert on the Fed---FUNNY

Hilarious!


The Colbert ReportMon - Thurs 11:30pm / 10:30cFed's Deadwww.colbertnation.comColbert Report Full EpisodesPolitical HumorU.S. Speedskating


HT to Clusterstock.

Testosterone link to aggression may be all in the mind : Nature News

Testosterone link to aggression may be all in the mind : Nature News: "Women who received testosterone made significantly higher offers than those who received placebo — an average of 3.9 money units compared with the placebo group's average offer of 3.4 money units.'In the socially complex human environment, pro-social behaviour, not aggression, secures status,' says Michael Naef, an

U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says - Bloomberg.com

Wonder why the economy is slow? Consider these numbers from Zillow and Bloomberg:U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says - Bloomberg.com: "U.S. homeowners have lost about $5.9 trillion in value since the housing market peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com.Almost half a billion dollars was wiped out this

Even Warren Buffett makes some investment mistakes

We all make mistakes, some investments don't work like we hope, even Warren Buffett does not bat 1000.Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com: "At NetJets, the returns have been disappointing — and lately the losses severe. Through his investment company, Berkshire Hathaway, he bought the private jet travel business, which caters to the affluent, for $725 million

Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com

We all make mistakes, even Warren Buffett:Change in Management at a Berkshire Unit Encounters Snags - NYTimes.com: "At NetJets, the returns have been disappointing — and lately the losses severe. Through his investment company, Berkshire Hathaway, he bought the private jet travel business, which caters to the affluent, for $725 million in 1998. Even though Berkshire does not provide detailed

Free candy?

YouTube - The gift economy | Marketplace Dept. of Behavioral Economics: "A generous candy stash raises a co-workers status, but sometimes the rules of exchange get confusing. Behavioral economist Dan Ariely uses his Predicably Irrational insights to help Marketplaces Eve Troeh understand social norms and social contracts"

Unbanked and underbanked

The FDIC issued a report today that shows that many Americans do not have access to banking or choose not to use the banking system.First the results:From FDIC.gov: An estimated 7.7 percent of U.S. households, approximately 9 million, are unbanked. These households do not have a checking or a savings account.... In addition to the

Report: Many minorities shun banks - USATODAY.com

Report: Many minorities shun banks - USATODAY.com: "Nearly 30 million households have no bank account or have one but also use alternate financial services at least occasionally, according to the FDIC report. The survey, the FDIC's first in-depth study of the issue, was conducted by the Census Bureau.The problem is most acute among minorities: 53% of African-American households and 43% of

Pirates float an equity issue

Yes it is now possible (in some parts anyways) to buy stock in the Pirates! No, not the Pittsburgh Pirates. The Somali pirates of course. They have floated shares. (got to love the bad pirate humor!)From the Marginal RevolutionWho says there's a credit crunch? Somali pirates are raising money through a local equity offering: In Somalia's main pirate lair of Haradheere, the sea gangs have

Buy stock in the pirates. No Not the Pittsburgh Pirates, the Somali Pirates

Marginal Revolution: Who says there's a credit crunch?: "Who says there's a credit crunch?Somali pirates are raising money through a local equity offering: In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate."

Marginal Revolution: Who says there's a credit crunch?

Marginal Revolution: Who says there's a credit crunch?: "Who says there's a credit crunch?Somali pirates are raising money through a local equity offering: In Somalia's main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate."A great teaching example, but come one, a tad illegal?

Hostile takeovers on from MarketPlace

Hostile takeovers on Vimeo: "We all know what a takeover is. That’s when one company agrees to be bought by another. But what happens when companies don’t agree and the takeover goes hostile? Senior Editor Paddy Hirsch explains."Hostile takeovers from Marketplace on Vimeo.

SSRN-Short Seller Trading in Companies with a Severe Accounting Irregularity by Jap Efendi, Edward Swanson

So at least some people can identify accounting regularities! Will discuss in class.SSRN-Short Seller Trading in Companies with a Severe Accounting Irregularity by Jap Efendi, Edward Swanson: "We find that shorts establish significant positions more than a year before the average restatement announcement, those positions increase as the announcement month approaches, and the largest positions

SSRN-Social Capital and Community Economic Development in Los Angeles Koreatown: Faith-Based Organizations in Transitional Ethnic Community by Hyunsun Choi

Maybe it does pay to pray. (and not just like you are thinking!)SSRN-Social Capital and Community Economic Development in Los Angeles Koreatown: Faith-Based Organizations in Transitional Ethnic Community by Hyunsun Choi: "Between October 2002 and October 2003, a spatial analysis of U.S. census records and the Korean Business Directory was performed to clarify the distribution of the Korean

The Science of Saving | Big Think

The Science of Saving | Big Think: "Dan Ariely gives tips on how we can learn to compare each dollar we spend to a trip to the Bahamas, or a latte."I think some of my own problems is that I just assume this was how everyone thinks. Opportunity costs matter. Not sure why some people seemingly ignore them.HT to Freaknomics

News from 11/30/09 That is 1909 not 2009!

TimesMachine - New York Times 11/30/09--that is Monday November 30, 1909 (100 years ago.)From the NY Times Timemachine:Who was speaking? Senator Nelson Aldrich (R of NY)."...until human nature is changed, it will be impossible to prevent, either by legislation of otherwise, periods of overspeculation with undue inflation of values and overextension of credit."Wow. 100 years later and it

Warren Buffett's Secrets To Success

Warren Buffett's Secrets To Success:Video from the Business Insider (Alice Schroeder the author of Snowball is interviewed by Henry Blodget)

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Internal Governance of Firms

I really like this insight. It is from Raghuram Rajan's discussion of The Internal Governance of Firms by Acharya and Myers. It will definitely be added to class notes.The simple version is that when junior level managers want to climb to the top, they have a vest interest in monitoring senior level managers.The Harvard Law School Forum on Corporate Governance and Financial Regulation »

How Hershey Can Thread the Cadbury Needle - Deal Journal - WSJ

How Hershey Can Thread the Cadbury Needle - Deal Journal - WSJ: "Hershey must secure majority economic control of the combined entity while trying to minimize its total leverage. At the same time, it ideally wants to preserve its own dual-class structure so that the Trust that controls Hershey retains an economic interest above a 15% threshold as well as significant voting control."Interesting

Google Trends: Gold

Google Trends: Gold: "Scale is based on the average worldwide traffic of gold in all years"I am surprised by this given the seemingly endless talk about gold prices. Looking at Google trends on Gold, there is no apparent relationship between volume of searches and changes in gold prices. At least at first pass. In other words I did not check my work at all!The Dependent variable is Absolute

YouTube - Behavioral Economics: How Do People Evaluate Risk in Everyday Situations?

YouTube - Behavioral Economics: How Do People Evaluate Risk in Everyday Situations?:Mood and how much control you beleive you have influence risk perceptions. The following video is from the Barcelona Graduate School of Economics (GSE):"Professor Robin Hogarth uses a novel new methodology to demonstrate that even relatively simple measures of mood state can have a significant effect on

SEC's expansion of Sarbanes-Oxley Act could mean big costs for smaller companies | News for Dallas, Texas | Dallas Morning News | Will Deener | Business Columnist | Dallas Morning News

We've always known SOX adds significantly to compliance costs, but wow. No wonder my chairman Jeff Peterson calls it the "no accountant left behind act".SEC's expansion of Sarbanes-Oxley Act could mean big costs for smaller companies | News for Dallas, Texas | Dallas Morning News | Will Deener | Business Columnist | Dallas Morning News: "Professor Peter Iliev said he nailed down the cost of

Kevin Volpp: Behavioral Economics and Healthy Behaviors :: The Daily Gazette

Kevin Volpp: Behavioral Economics and Healthy Behaviors :: The Daily Gazette: "Volpp concluded by noting three major questions in this field individual behavior and health: First, are there built-in default benefits to be had? Second, in what ways can we make information provision more precise? Third, how can we shape incentives to get people to behave in a healthy manner?"

UC Davis News & Information :: Workshop on Economics, Neuroscience and Hormones

Well we missed the conference, but I will look for info from itUC Davis News & Information :: Workshop on Economics, Neuroscience and Hormones: "Another new area -- endocrinological economics -- studies how hormones such as testosterone and estradiol affect economic behavior. At the workshop, Coren Apicella, research fellow at Harvard University, will discuss how testosterone levels affect

Exposure to luxury goods

Along the lines of the priming video we saw a few days ago, here is more on "priming" from Chua and Zou. Very interesting.The Devil Wears Prada?from the abstract : "This paper demonstrates that mere exposure to luxury goods increases individuals’ propensity to prioritize self-interests over others’ interests, influencing the decisions they make. Experiment 1 found that participants primed with

Science Friday Archives: The Science of Decision-Making

Science Friday Archives: The Science of Decision-Making: "Paper or plastic? Steak or salmon? Stay or go? Every day, we make thousands of decisions, most minor, some major. But how does your brain make the choice? In this hour, we'll take a look at the science of decision making. Can your genes influence split second decisions? And how do your emotions influence the way you decide?"From July, but

: Warren Buffett and Bill Gates: Keeping America Great

From Columbia Unviversity. WOW.Public Offering : Warren Buffett and Bill Gates: Keeping America Great: "On November 12, 2009, Warren Buffett, MS ’51, and Bill Gates met with more than 700 students, faculty members and alumni from Columbia Business School in a town hall event, which was filmed for global broadcast by CNBC. Buffett and Gates responded to questions from the student body about the

YouTube - Other People's Money speech by Danny DeVito

YouTube - Other People's Money speech by Danny DeVito: "Other People's Money speech by Danny DeVito"If you want to feel old, mention this movie in class, virtually no one has heard of it. Fortunately some of it is still online. Here is Jorgy's speech, and here is Danny Devito's

Hulu - The Office: Shareholder Meeting - Watch the full episode now.

Hulu - The Office: Shareholder Meeting - Watch the full episode now.HT to Nminow

Is It Possible To Invent An Investment Product Too Stupid To Find Buyers?

Is It Possible To Invent An Investment Product Too Stupid To Find Buyers?: "Last Friday, he posted a satirical article called First 100x Leveraged ETFs. It made fun of the trend toward higher leverage among ETF products....he was deluged with emails. Many people got the joke. But a full 65% expressed interest in some form or another in owning SOAR and SINK."mmm, Does any one else remember Sidd

Delayed Economic Reform Killed 14.5 Million Children | Swaminathan S. Anklesaria Aiyar | Cato Institute: Commentary

Delayed Economic Reform Killed 14.5 Million Children | Swaminathan S. Anklesaria Aiyar | Cato Institute: Commentary: "Had reforms started in 1970 rather than 1980, India would have grown faster. In this fast-growth scenario, i assume that per capita income growth in the 1970s would have been what was actually achieved in the 1980s: growth in the 1980s would have been what was actually achieved in

Islamic Finance: Lower Risk, But at What Cost? - BusinessWeek

Islamic Finance: Lower Risk, But at What Cost? - BusinessWeek: "Financial products based on 8th-century religious laws may seem an unlikely haven during a global crisis. But Islamic banking and financial services, based on traditional Muslim laws known as Sharia, are enjoying a major resurgence.A survey released on Nov. 5 by The Banker magazine found that assets held by Sharia-compliant banks

SSRN-In Search of Attention by Zhi Da, Joseph Engelberg, Pengjie Gao

From the AFA program:SSRN-In Search of Attention by Zhi Da, Joseph Engelberg, Pengjie Gao: "Abstract: Turnover, extreme returns, news and advertising expense are indirect proxies of investor attention. In contrast, we propose a direct measure of investor demand for attention -- active attention -- using search frequency in Google (SVI). In a sample of Russell 3000 stocks from 2004 to 2008, we

Why China Hates The Carry Trade

I had a student ask about this...Why China Hates The Carry Trade: "A carry trade is when you borrow from a currency with a low interest rate, and then invest in a currency with a higher interest rate. Say the US interest rate is 3%, and the Chinese interest rate is 5%. Borrow at 3%, invest at 5%, make 2%, because the Chinese yuan is pegged to the dollar at a fixed rate. "In international finance

Bill Billicheuck in the class room.

Hubris or sound economics? Either way it is a great example of why managers often "go with the Crowd."If you care about football (American style, not soccer) you no doubt have seen the story from a few weeks ago. Short version- New England was leading and had a fourth and two on their own 28 yard line. The standard prescription at this time is to punt the ball away. But instead they went for

Do Stockholders Really Know Best? - News Analysis - NYTimes.com

Great article by Andrew Ross Sorkin at the NY Times:DealBook Column - Do Stockholders Really Know Best? - News Analysis - NYTimes.com: "British takeover law essentially handcuffs the board of a target company from doing anything to block a deal. No poison pills. No staggered boards. No changing the shareholder vote date. The potential for a C.E.O. or entrenched board to block a deal — or

SSRN-The Real Effects of Financial Constraints: Evidence from a Financial Crisis by Murillo Campello, John Graham, Campbell Harvey

Here is the paper we were talking about yesterday in class when we relaxed the Modigliani and Miller assumptions of no transaction costs and allowed there to be market imperfections. The conclusion was that financial slack may be more valuable than we used to think.SSRN-The Real Effects of Financial Constraints: Evidence from a Financial Crisis by Murillo Campello, John Graham, Campbell Harvey:

Love And Envy Linked By Same Hormone, Oxytocin

Love And Envy Linked By Same Hormone, Oxytocin: "A new study carried out at the University of Haifa has found that the hormone oxytocin, the 'love hormone,' which affects behaviors such as trust, empathy and generosity, also affects opposite behaviors, such as jealousy and gloating."

Morgan Stanley: Blame Market Consolidation For The Soaring Cost Of Beer

Finally a finance article that students will care about! Clusterstocks's Business Insider posts on the price of beer in various countries as tied to market power of the top beer producers. Morgan Stanley: Blame Market Consolidation For The Soaring Cost Of Beer: "Morgan Stanleyshows pretty convincingly that beer costs more in countries where the top 3 market players hold a higher-than-average

UPDATE: Some Retailers Could Follow Wal-Mart's Credit Program - WSJ.com

UPDATE: Some Retailers Could Follow Wal-Mart's Credit Program - WSJ.com: "While companies with very strong credit are considered the most likely to be able to follow Wal-Mart if they choose, there are others that could supply their credit rating in certain cases for the supplier to obtain bank financing.'The issue is not how sound the retailer is, it's are they more sound than the vendor,' O'Shea

YouTube - Nice Guys Finish First (1/5) - Richard Dawkins

YouTube - Nice Guys Finish First (1/5) - Richard Dawkins: "First (of five) part of the 1986 documentary from the BBC Horizon series. In this video Richard Dawkins explains how natural selection can favour co-operation in nature, so long as it is of benefit to the selfish gene....in their attempts to earn real money, players must wrestle with a dilemma - whether to follow their natural instincts

Priming, Money and their Effect On Us

YouTube - Priming, Money and their Effect On Us: "An interesting experiment conducted by the BBC's 'Bang Goes The Theory Team' regarding a psychological phenomenon called 'Priming'. It is a phenomenon that may well change your understanding about the way we are all affected by what we see, and so, how we perceive our environment"So...money makes us hungry, more self-reliant, and better able to

The Psy-Fi Blog: Anchoring, The Mother of Behavioral Biases

The Psy-Fi Blog: Anchoring, The Mother of Behavioral Biases:"Anchoring is an easy-to-demonstrate, hard-to-eradicate behavioural bias that has all sorts of nasty implications for investors, many of them not obvious. In fact, along with availability, it has the claim to be the mother of all biases.The fundamental investment problem lies in the difficulty in deciding what something is intrinsically

SSRN-How Do Family Ownership, Control and Management Affect Firm Value? by Belen Villalonga, Raphael Amit

As my advanced corporate finance class tacks into capital structure and governance, we will be going over this article by Villalonga and Amit that finds that there to be a positive affect of family ownership/management.SSRN-How Do Family Ownership, Control and Management Affect Firm Value? by Belen Villalonga, Raphael Amit: "Analysis of the data indicates that family ownership creates value for

SSRN-The Cross-Section of Expected Stock Returns: What Have We Learnt from the Past Twenty-Five Years of Research? by Avanidhar Subrahmanyam

VERY good review article on the ability of financial models (CAPM, APT, Fama-French, etc) to predict and explain cross sectional stock returns).Super short version: While we have progressed, we have done so down different paths and there needs to be some standardization, testing for robustness, and checks for correlations across the many variables that have been used in past models.SSRN-The

The Christian Finance Faculty Association

Remember a few weeks ago I uploaded a video from the new Christian Finance Faculty Association? Well now they not only have their new website up, but also have announced they will be having a session at the AFA conference in January. Stay tuned.The new web site is: The Christian Finance Faculty Association: "Next MeetingAFAAtlanta, GeorgiaInformal breakfast meetingDate, Time TBAContact: Shane

How To Trade In Stocks (1940 original)

How To Trade In Stocks (1940 original)A true classic. Has value (no pun intended) from both an investment perspective and an historical one.How To Trade In Stocks (1940 original) Thanks to derekhernquist and FinanceTrends for this!

American Wages Are Out of Balance - NYTimes.com

A friend of mine would claim that there are no coincidences. Maybe she is right, but it sure seems it when two articles (one from the NY Times and an academic piece both come across my laptop within minutes of each other and each saying roughly the same thing: that the US work force (a group to which I am a part), better get ready for paycuts since currently the world economy is out of

Does overconfidence led to more firms being started?

Two somewhat competing papers were recently posted on SSRN. The Hayward, Shaperd, and Griffin paper suggests that hubris (overcondiSSRN-A Hubris Theory of Entrepreneurship by Mathew Hayward, Dean Shepherd, Dale Griffin: "Although data from the U.S. Census Bureau's Business Information Tracking Series show that 60 percent of the businesses launched between 1989 and 1992 did not survive six years,

Mishkin: It's Cool That The Fed Is Blowing Another Bubble Because This Kind Of Bubble Is Harmless

Mishkin: It's Cool That The Fed Is Blowing Another Bubble Because This Kind Of Bubble Is HarmlessWhile Mishkin is clearly a smart guy, I have to disagree with him on this. First of all you can argue that leverage (this time by governments and not individuals) is funding the bubble. Secondly (and probably more importantly), bubbles, of any type, lead to allocational errors (too much investment

Wolves have their own social security issues

Wolves Lose Their Predatory Edge In Mid-life, Study Shows: "When older wolves can no longer hunt successfully, younger wolves share their kill with them, in what MacNulty describes as a lupine version of Social Security. While a high ratio of old-to-young wolves may benefit elk, it could strain the wolf population because there aren't enough workers to support retirees."

Identifying PTSD: Light Shed On Brain's Response To Distress, Unexpected Events

I wonder if the same holds true for portfolio losses? If so, then how do we get people to expect, or at least realize, that asset prices do take large price swings.Identifying PTSD: Light Shed On Brain's Response To Distress, Unexpected Events: "'When the noise is unexpected, the brain's response is larger,' said UAB psychologist David Knight, Ph.D., principal investigator on the study, which is

Dr. Steve Horan talks about Portfolio Benchmarking - SBUBusinessTV on blip.tv

Dr. Steve Horan talks about Portfolio Benchmarking and measuring returns with cash inflows and outflows- SBUBusinessTV on blip.tvThis is the second part of the lecture Steve Horan gave to my students on Friday at the School of Business sponsored breakfast.

Q6 Fall 2009: Do you need a nudge?

Q6 Fall 2009: Do you need a nudge?: "Richard Thaler outlines how principles from behavioral economics can help policymakers — and managers — achieve better outcomes.Q: Could you explain some of the key ideas in Nudge: nudges, choice architecture, and libertarian paternalism?'Libertarian paternalism' suggests that these two seemingly contradictory terms can actually define a non-contradictory and

Dr. Steve Horan discusses Exchange Traded Funds - SBUBusinessTV on blip.tv

Dr. Steve Horan discusses Exchange Traded Funds - SBUBusinessTV on blip.tvThis is the first of three parts.On ETFsOn calculating portfolio returns in and out cash flowsOn the value of a CFA.

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Is Delaware’s Antitakeover Statute Unconstitutional?

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Is Delaware’s Antitakeover Statute Unconstitutional?: "...no bidder in the past nineteen years has been able to achieve 85% in a hostile tender offer against a Delaware target. "Which implies that it is possible that the super-majority provisions are in fact unconstitutional since the courts at the time (1988) said

BonaResponds videos

Ok, so this was a mistake...I was trying to post it on the BonaResponds blog, but oh well....and who knows, maybe someone out there will like it and come volunteer with us. (I would rather you do that than donate money to us, but if you want to we do accept donations ;) )YouTube - Machias video Nov 8: "Video from our work with the Christian Youth Corps in Machias on the Eisenhardt project. The

Kraft Makes $16.3 Billion Hostile Bid for Cadbury - DealBook Blog - NYTimes.com

A week early for class, but close enough:Kraft Makes $16.3 Billion Hostile Bid for Cadbury - DealBook Blog - NYTimes.com: "Kraft on Monday formally made a £9.8 billion ($16.3 billion) hostile bid for Cadbury, making official its effort to create an international food giant. Cadbury quickly rejected the new proposal, setting up a potentially bruising fight for control of the British

Steve Horan on ETFs, measuring returns, and importance of the CFA

Yesterday Steve Horan spoke to my classes. Here are the slides of his presentation. The video will be uploaded soon.SBU CFA 1 From Steve

Joel Benington's presentation (PDF) to my Bahaviorial Finance class

The basic idea of the talk was that as social animals, we have evolved to be trusting and helpful. It was a great presentation. Next time we will have to video it (hint hint!)

YouTube - Bob Brooks and Jonathan Godbey of the Christian Finance Faculty Association

YouTube - Bob Brooks and Jonathan Godbey of the Christian Finance Faculty Association: "A short video interview with Bob Brooks and Jonathan Godbey two of the founders of the Christian Finance Faculty Association from their inaugural meeting at the 2009 FMA conference in Reno."Here is the link to the web site and presentation the speakers refer to in the interview. .

SSRN-Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances by John Beshears, Daniel Bergstresser

SSRN-Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances by John Beshears, Daniel Bergstresser: "Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances"Interesting and important, but not all that surprising. From the introduction:"...a lack of financial sophistication may have made a subset of households more

SSRN-Do Hedge Fund Managers Identify and Share Profitable Ideas? by Wesley Gray

To share or not to share that is the question. Shakespeare it is not), but when and if to share ideas is an important question.How so? Suppose you have a great idea. It is an idea that you think could make you much money. You are not sure however. On one hand it could be a bad idea. But to gauge how good of idea (or to brag about it?), you have to tell others. But if you tell others,

Behavioral Corporate Finance

Behavioral Corporate Finance is the main topic in class tonight. Here are some of the links we will be discussing:Musings on Markets: Behavioral Corporate Finance 1: The Objective in Decision Making:: "When stock prices go up or down on the announcement of an action, there is some aspect of that action that is pleasing or troubling to investors. All too often, markets turn out to be right and

Q&A: Is Market Efficiency the Culprit? - Fama/French Forum

Q&A: Is Market Efficiency the Culprit? - Fama/French Forum: "Most investing is done by active managers who don't believe markets are efficient. For example, despite my taunts of the last 45 years about the poor performance of active managers, about 80% of mutual fund wealth is actively managed. Hedge funds, private equity, and other alternative asset classes, which have attracted big fund inflows

The Hubris of Economics | The Big Picture

The Hubris of Economics | The Big Picture:Barry Ritholtz discussing a WSJ piece ( Crisis Compels Economists To Reach for New Paradigm.) "...an intriguing look at the problems of the the field of economics. It went, however, way too easy on both the profession and its practitioners. The article fails to ask some very basic questions about the soft science, and does not discuss the fundamental

Buffett Takeover Reduces Successor’s Need for ‘Amazing Insight’ - Bloomberg.com

Interesting take on Berhshire's takeover of Burlington Northern. I confess I did not consider this at all, but it makes sense. Buffett may be concerned that his successor would be left with a large cash holding that would have to be invested. This purchase, which fits his value investing mantra, effectively does away with the cash in one fast swoop.Buffett Takeover Reduces Successor’s Need for

Predictably Irrational: heursitics and coffee shops

Predictably Irrational: "...what do we do when we need to make decisions but making them “correctly” is too time consuming and difficult? We adopt simplifying rules, which academics call heuristics, and these heuristics provide us with actionable outcomes that might not be ideal but they help us to reach a decision. In the case of coffee and other, similar decisions, one of the heuristics we

Food for Grooming - Freakonomics Blog - NYTimes.com

Food for Grooming - Freakonomics Blog - NYTimes.com: "New research indicates that in addition to exchanging goods and services, monkeys adjust exchange rates as supply changes. Ronald Noe, a primate ethnologist, measured the grooming behavior of vervet monkeys in southern and eastern Africa. Among these monkeys, grooming is a hot commodity and is viewed by scientists as a form of “payment” for

Common Objections to Capitalism - Art Carden - Mises Institute

Common Objections to Capitalism - Art Carden - Mises Institute: "This article is based on Professor Carden's lecture 'Common Objections to Capitalism,' given at the 2009 Mises University Summer Program on July 30, 2009, and available as an MP3 download.A lot of people object to what they call "capitalism," but their objections hold little or no water once they are examined critically. Let's

Active Management Loses in Risk Study - WSJ.com

Active Management Loses in Risk Study - WSJ.com: "The study by Morningstar Inc. found that, over the past three years, while about half of actively managed funds outperformed their respective Morningstar indexes -- which cover the nine different Morningstar investment styles -- only 37% did on a risk-, size- and style-adjusted basis. The numbers are similar for five and 10-year returns.'It's not

(Lots of) Cash for Clunkers - Freakonomics Blog - NYTimes.com

(Lots of) Cash for Clunkers - Freakonomics Blog - NYTimes.com: "Edmunds.com reports that its statistical analysis of the Cash for Clunkers program finds that the program generated only 125,000 extra new vehicle sales, meaning that the cost to the U.S. government was $24,000 for each of those new cars.The reason the cost per incremental car is so high is that, according to Edmunds.com’s modeling,

Soros Launches Effort to Battle Free-Market Zeal | Newsweek Voices - Michael Hirsh | Newsweek.com

Soros Launches Effort to Battle Free-Market Zeal | Newsweek Voices - Michael Hirsh | Newsweek.com: "...financier George Soros is announcing a $50 million effort to speed things along. This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of 'free-market fundamentalism,' among them Nobelists Joseph Stiglitz, George Akerlof

Financial Bubbles: Why Do Fools Fall in Love? at SmartMoney.com

Financial Bubbles: Why Do Fools Fall in Love? at SmartMoney.comBefore we get to finance, consider these two common occurrences:1. Imagine it is Friday Night. You do not have to work until Monday. In fact you have no commitments. You just finished all of your tests, papers, etc. You are home alone. All of your friends are out. You imagine them having great time "out" frequenting local "

Nightly Business Report . Your Mind and Your Money | PBS

Nightly Business Report . Your Mind and Your Money | PBS: "Behavioral finance teaches us few people always make logical investment decisions. Psychological and emotional biases get in the way. NBR's year-long 'Your Mind and Your Money' series aims to help investors understand those biases and make more rational decisions.Reports and interviews will appear in the NBR program on select Mondays, and

A graph of why you should not hold levered ETF's long term

DO you remember last week when I tweeted from the FMA conference about the luncheon speaker who pointed out the fact that levered ETF's that regularly relever are good at mirroring the market on a daily basis, but in the long term are bad bets since they are short an embedded option on Gamma which makes it very likely that the levered fund will be a money loser?To show this, let's look at two

WGBH American Experience - The Crash of 1929

WGBH American Experience - The Crash of 1929Good video of the crash from PBS. I can not figure out how to embed it.

Seeds of adult dishonesty are sown in youth, study finds -- latimes.com

Seeds of adult dishonesty are sown in youth, study finds -- latimes.com: "A new study claims there is truth to the adage: People who cheated on exams in high school are considerably more likely to be dishonest later in life, according to a report to be released today by the Josephson Institute of Ethics.The study, which surveyed nearly 7,000 people in various age groups nationwide, offers a

An Experiment in Hedging With ETFs - WSJ.com

Remember what I mentioned last week? Holding leveraged ETF's log term is generally a losing game.An Experiment in Hedging With ETFs - WSJ.com: "ProShares warns investors that it aims to have the funds' movements correspond to the inverse of the relevant market indicator on a daily basis. Over more time, the effects of compounding can (and generally will) dilute or enhance the results. For the

Nightly Business Report . Your Mind and Your Money | PBS

Nightly Business Report . Your Mind and Your Money | PBS: "Behavioral finance teaches us few people always make logical investment decisions. Psychological and emotional biases get in the way. NBR's year-long 'Your Mind and Your Money' series aims to help investors understand those biases and make more rational decisions.Reports and interviews will appear in the NBR program on select Mondays,

YouTube - Shlomo Benartzi - Leading Authority on Behavioural Finance

YouTube - Shlomo Benartzi - Leading Authority on Behavioural Finance: "Professor Shlomo Benartzi is a leading authority on behavioural finance with special interests in retirement planning, investor behaviour and behavioural wealth management."His discussion is just an introduction but he definitely hits some good points. For instance, I know I am guilty of not refinancing nearly enough. And

GMAC seeking third round of bailout funds - WSJ - Oct. 28, 2009

GMAC seeking third round of bailout funds - WSJ - Oct. 28, 2009: "GMAC Financial Services is seeking a third round of bailout funds from the U.S. Treasury Department, according to a report in the Wall Street Journal....the U.S. government could provide an additional $2.8 billion to $5.6 billion to the lender....The U.S. has already injected $12.5 billion in the lender since December 2008 and owns

Why Sleeping On It Helps | World of Psychology

WOW. This one has some major ramifications.The short version is that the authors found that sometimes we really do think too much and when we do, out biases interfere with our knowledge and ability and our decision making actually gets worse. On the other hand sleeping (and I would venture yoga, meditation, and exercise) seems to clear the brain so that it (we) can make a better decision.Why

Naissance Capital to Invest in Firms With Women as Directors - NYTimes.com

Naissance Capital to Invest in Firms With Women as Directors - NYTimes.com: "Naissance Capital, based in Zurich, will start the Women’s Leadership Fund in January, which will invest in companies whose boards include women. It also plans to take minority stakes in companies without women on their boards and to use its ownership to encourage changes.R. James Breiding, a co-founder of Naissance

White House mulls unwinding too big to fail firms | Politics | Reuters

White House mulls unwinding too big to fail firms | Politics | Reuters: "A council that includes the U.S. Treasury Secretary would help set policy for dealing with troubled financial firms under White House plans to deal with the 'too big to fail' problem, CNBC television said on Monday citing sources.The Obama administration would give the Federal Deposit Insurance Corp authority to unwind large

CHART OF THE DAY: The iPod And Big Mac Indexes Just Don't Work

CHART OF THE DAY: The iPod And Big Mac Indexes Just Don't Work: "...a side-by-side comparison of the Big Mac Index and the iPod Nano Index suggests that these might not really be good metrics for measuring currency valuations. As you can see, the two indexes result in wildly uncorrelated results. If it were really a matter of currency valuation, you’d expect both to show similar valuation

Challenging Modern Portfolio Theory greenfaucet

We will be discussing this in class soon! Challenging Modern Portfolio Theory greenfaucet: "The costs of getting in financial stress are high, much less when a firm is teetering on the edge of insolvency. The cost of financing assets goes up dramatically when a company needs financing in bad times.But the fair weather use of the M-M theorems is still useful, in my opinion. The cost of the

Galleon insider trading: 8 trades they allegedly made - Oct. 19, 2009

Examples of the specific alleged insider trades:Galleon insider trading: 8 trades they allegedly made - Oct. 19, 2009: "The government's case in what it is calling the largest insider trading case involving a U.S. hedge fund contains a detailed list of trades involving household-name companies.Investigators have pieced together a case that alleges more than $25 million in illegal gains based on

Finance clubs manage millions, segue into future Wall Street jobs on CollegiateTimes.com

This is of special interest to SIMM students. It is about Virginia Tech's programs.Finance clubs manage millions, segue into future Wall Street jobs on CollegiateTimes.com: "“They’ve given us the money for two reasons,” said Eric Eichelberger, BASIS co-CEO and senior engineering major. “One is to produce competitive returns for the university and use that money toward scholarships and programs.

Instant herding?

KaChing Lets Investors See and Mirror Experts’ Trades - NYTimes.com: "KaChing, a Web site where 400,000 amateur and professional investors manage virtual portfolios. Others have logged on to see what the investors on the site are doing and make the same trades in their own real portfolios.On Monday, KaChing is to add a new twist. Customers can set up brokerage accounts that automatically mirror

Wall Street's Naked Swindle : Rolling Stone

Interesting articles do appear in Rolling Stone. So now you can say you read it for the finance. :)Wall Street's Naked Swindle : Rolling Stone: "On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would

Ground floor and Christian Finance Faculty Association

Want to get in on the Ground floor of a new group? Here is your chance.."The inaugural meeting of The Christian Finance Faculty Association will be held at the Financial Management Association meeting in Reno, Nevada in the Alpine Room of the Nugget Hotel on Friday, October 23, 2009 from 7:00 - 9:00 AM. The theme of this meeting will be exploring intersections between a Christian worldview and

Interview of Jason Zweig on Neuroeconomics -- GuruFocus.com

Interview of Jason Zweig on Neuroeconomics -- GuruFocus.com: "'There was a beautiful study that was published in the The Journal of Finance a couple of years ago about the selection of institutional money managers. It basically found that the professionals who pick money managers, in this case it was pension funds, tend to buy high and fire low. They invest in whichever managers have the best

Billionaire among 6 nabbed in inside trading case - Yahoo! Finance

Billionaire among 6 nabbed in inside trading case - Yahoo! Finance: "Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.U.S. Magistrate Judge Douglas F. Eaton set bail at $100 million to

A look back to Dow 10000-1999 style

Interesting look at the first time the Dow hit 10,000 back in 1999.Visit msnbc.com for Breaking News, World News, and News about the Economy

Guilty As Charged: Chase Mortgage Ad From 2005 Proves Subprime Culpability (JPM)

Check out the 2005 ad they have replicated. Wow. In hindsight looks beyond stupid.Guilty As Charged: Chase Mortgage Ad From 2005 Proves Subprime Culpability (JPM):

Reducing Incentives for Risk-Taking - DealBook Blog - NYTimes.com

Shareholders are the most important party in the nexus of contracts largely because as residucal claimants they are in the best position to monitor the firm. So it is generally well accepted that managers should manage to maximize shareholder wealth. But to what extent does this mean executives can totally forget about other stakeholders.In the traditional view, if executives do not "take

Stock Whizzes Born Not Made, With Right Dopamine Gene (Update1) - Bloomberg.com

We will definitely be talking about this one when classes start up again on Wedneday!Stock Whizzes Born Not Made, With Right Dopamine Gene (Update1) - Bloomberg.com: "People who excel at making snap decisions and learn quickly from their mistakes, skills tied to successful stock traders, may share a genetic secret, according to a study by German neuroscientists.These talents have been linked in

BBC NEWS | Business | Bloomberg acquires BusinessWeek

BBC NEWS | Business | Bloomberg acquires BusinessWeek: "The financial news and data provider Bloomberg has agreed to buy BusinessWeek magazine."

Dealbook Column - Don’t Fail, or Reward Success - NYTimes.com

First the standard textbook, academic speal: When dealing with pay issues, there are two things to keep in mind: Level of pay and form of pay. The level of pay (how much) is what generally draws criticism and anger (caused in some part by jealousy) and is what "gets people in the door". Form of pay (straight salary, options, etc) is what motivates people. The problem can be that there is

New ways of measuring market risk tolerance - Yahoo! Finance

New ways of measuring market risk tolerance - Yahoo! Finance: "The asset-allocation tools you'll find online or that an adviser will employ when working with you routinely recommend stock allocations of 70% or more if you're younger than 55 or so. Target-date retirement funds that are the default investments in most 401(k) plans similarly have high stock concentrations, as do planner

Bear Stearns trader thought funds could "blow up" - Telegraph

Bear Stearns trader thought funds could "blow up" - Telegraph: "In a series of emails he sent to his personal Google Mail account in diary, Mr Tannin wrote that he was worried one of the funds 'was going to subject investors to 'blow up risk.' 'I was worried that this would all end badly and that I would have to look for work,' the same email continues."

Book Review: 'This Time Is Different' - WSJ.com

Book Review: 'This Time Is Different' - WSJ.com:I am definitely getting this book! This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff.The WSJ reviews it. Here is the most important part:"19th-century British journalist Walter Bagehot claimed that during each speculative upturn merchants and bankers 'fancy the prosperity they see will last always,

A Guided Tour Of The NYC Commercial Real Estate Wreckage

A Guided Tour Of The NYC Commercial Real Estate Wreckage: "Last night's PBS NewsHour took a look at the bearish obsession du jour, the commercial real estate market. Real estate analyst Bob White took them around to show some of the ugliest cases out there"

Video on common investment mistakes

Interesting look at 8 common investment mistakes that uses Big Brown (the horse, not the delivery company). (Overly optimistic, ignoring data, etc)Good for behavioral finance!

Mind - How Nonsense Sharpens the Intellect - NYTimes.com

Mind - How Nonsense Sharpens the Intellect - NYTimes.com: "Researchers have long known that people cling to their personal biases more tightly when feeling threatened. After thinking about their own inevitable death, they become more patriotic, more religious and less tolerant of outsiders, studies find. When insulted, they profess more loyalty to friends — and when told they’ve done poorly on a

Caltech Scientists Develop Novel Use of Neurotechnology to Solve Classic Social Problem - Caltech

Caltech Scientists Develop Novel Use of Neurotechnology to Solve Classic Social Problem - Caltech: "...providing public goods optimally and fairly is difficult, Rangel notes, because the group leadership doesn't have the necessary information. And when people are asked how much they value a particular public good—with that value measured in terms of how many of their own tax dollars, for instance

Merrill Lynch’s Compensation Plan Is Lesson for Pay Czar - NYTimes.com

Merrill Lynch’s Compensation Plan Is Lesson for Pay Czar - NYTimes.com: "Merrill program, which was supposed to align its top employees’ pay with the company’s long-term performance, did not keep workers from taking risks that nearly sank the brokerage giant. And some of its senior executives still stand to collect millions of dollars in stock under the plan.As the Obama administration’s pay czar

Handicapping the 2009 Economics Nobel - Real Time Economics - WSJ

Handicapping the 2009 Economics Nobel - Real Time Economics - WSJ: "Adherents of the efficient-markets hypothesis might say that University of Chicago Booth School of Business economist Eugene Fama has an excellent chance of winning the Nobel Prize in economics. Then again, recent events have thrown the idea that markets accurately reflect information available to investors — the

Monkey cooperation and fairness

FASCINATING!YouTube - Monkey cooperation and fairness: "A pair of capuchin monkeys (Cebus apella) show very compelling signs of cooperation and a sense of fairness, by working together to solve a problem using tools, and then sharing the reward."

John Kay - Markets after the age of efficiency

A good article on market efficiency. Remember markets are good, not perfect. FT.com / Columnists / John Kay - Markets after the age of efficiency: "Market efficiency is a hypothesis about the way markets react to information and does not necessarily imply that markets promote economic efficiency in a wider sense. But there is a relationship between the two concepts of efficiency. It has long

2nd UPDATE: Prison Terms Upheld For Adelphia Founder, Son - WSJ.com

2nd UPDATE: Prison Terms Upheld For Adelphia Founder, Son - WSJ.com: "-A federal appeals court on Monday upheld the prison sentences of Adelphia Communications Corp. founder John Rigas and his son Timothy after they were convicted in 2004 in a massive accounting scandal at the telecommunications company.In an opinion Monday, the U.S. Second Circuit Court of Appeals denied a bid by the Rigases to

Lo thinks FDIC could fail - Pensions & Investments

Lo thinks FDIC could fail - Pensions & Investments: "The FDIC might fail, requiring a federal bailout, dragged down by the failure of regional banks with substantial commercial mortgage debt, Andrew W. Lo warned.Mr. Lo, founder and chief investment strategist of AlphaSimplex Group and a finance professor at the Massachusetts Institute of Technology, said that a failure to restructure debt on

Nearly 200 stocks could be delisted from NYSE, Nasdaq - USATODAY.com

Nearly 200 stocks could be delisted from NYSE, Nasdaq - USATODAY.com: "There's something other than just shame facing stocks struggling to stay above $1: getting booted from their stock market. After months of suspending requirements that stocks stay above $1, both the Nasdaq and New York Stock Exchange are cracking down. On Aug. 3 both reinstituted the rule, saying stocks that don't trade above

Private Equity Buy-Outs Are Struggling

Private Equity Buy-Outs Are Struggling: "The New York Times explains how PE firms managed to find profits on deals, even when they badly miscalculated and drove the firm into bankruptcy."

Eugene F. Fama: Economist - Fama/French Forum

Eugene F. Fama: Economist - Fama/French Forum: "In an interview conducted by Professor Richard Roll, famed University of Chicago economist Eugene F. Fama discusses his life, research, and contributions to the field of finance. Produced by Dimensional in conjunction with the American Finance Association. Directed and edited by Gene Fama Jr."Thanks to Mark P for pointing this out to me!

Introducing DealBook Dialogue - DealBook Blog - NYTimes.com

Be sure to follow this! A roundtable on the impact of the financial crisis. LOOKS VERY INTERESTING!Introducing DealBook Dialogue - DealBook Blog - NYTimes.com: "DealBook want to challenge or confirm the emerging consensus about the financial crisis. To bring together 12 top academics, market participants and regulators with Professor Davidoff to write something original that really makes us

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Patterns in Corporate Events

While the market efficiency debate continues (that it is really a degree of market efficiency not an either or discussion is often forgotten), it seems more and more that the independence of investment and financing decisions has been scuttled. From Private equity firms to corporations it seems that there are definite hot cold financing times and that these influence activities from takeovers to

What do marshmallows have to do with self-control? « Nudge blog

What great timing, we just discussed this in class on Wed. What do marshmallows have to do with self-control? « Nudge blog: "Psychology professor Walter Mischel’s 1960s experiment involving children, sugary sweets, and self-control has become a classic. The set-up is simple. A researcher lets a child pick a favorite food from a tray of cookies, marshmallows, candies, pretzels, and other sweets.

Charlie Rose - Paul Volcker, Former Federal Reserve Chairman

Charlie Rose - Paul Volcker, Former Federal Reserve Chairman: "Part I of Paul Volcker, former chairman of the Federal Reserve, one of the wisest men on the economy. In part one of this conversation, he sheds light on the global economic crisis, how we got here, where we are, and what is next for us"

Mandelbrot Interview

FT.com / FT Markets News-GREAT! Interview with Benoit Madelbrot. HIGHLY Recommended. Required for my classes. On Market efficiency, non normality, history of finance, and price dicontinuities. Fascinating. Video is here.HT to pkedrosky

Neuroeconomics from MIT

Neuroeconomics | MIT World: "Drazen Prelec peers into the human brain while it makes decisions. In his corner of the new field of neuroeconomics, Prelec uses a functional magnetic resonance imaging (fMRI) machine to scan minds pondering the pros and cons of purchasing and selling products like Godiva chocolate and flash drives.Prelec first provides a brief background on the emergence of his

The Exiled Victims of Bernie Madoff - Money 2009 -- New York Magazine

The Exiled Victims of Bernie Madoff - Money 2009 -- New York Magazine: "For most of us, the Madoff matter is over. The man is in jail for the rest of his life, his associates have lawyered up, his wife is a pariah. But for those victimized by Madoff, the story is just beginning. There are several kinds of Madoff victims, of course. Some are wealthy beyond imagination and hardly affected at all.

FT.com / In depth - How to tame the animal spirits

FT.com / In depth - How to tame the animal spirits: "...policymakers have recognised that the financial system cannot continue to operate as an off-balance-sheet liability of the public sector, leaving the taxpayer to bear the cost of the clean-up after any catastrophe.....President Barack Obama declared in June that its “proposals would compel these firms to internalise the costs they could

Does the Incentive Effect of the Charitable Deduction Vary Across Charities? by Robert Yetman, Michelle Yetman

SSRN-Does the Incentive Effect of the Charitable Deduction Vary Across Charities? by Robert Yetman, Michelle Yetman: "We find significant differences in the response of donations to taxes across different types of charities. Donations to charities that provide basic goods and services to humans in need appear to be unresponsive to tax incentives, while donations to charities that appeal to higher

DNA-Based Investing Strategies - Barrons.com

DNA-Based Investing Strategies - Barrons.com: "Science can tell the difference between nature and nurture. Personal investing strategies are based on genes, brain patterns, and human experience. Columnist Jason Zweig goes to the University of Pittsburgh to uncover whether science can tell whether he is more guided by his nature, or by his life."

Men, Women and Money | Psychology Today

Men, Women and Money | Psychology Today: "For most people, money is never just money, a tool to accomplish some of life's goals. It is love, power, happiness, security, control, dependency, independence, freedom and more. Money is so loaded a symbol that to unload it--and I believe it must be unloaded to live in a fully rational and balanced relationship to money--reaches deep into the human

Been gone for a while

As many of you know, I have been gone for a week, so I will post a few things today that are rather old but have been wanting to comment on.First is this piece by George Will. Free trade is good and that things such as tariffs hurt the majority of people involved. George F. Will - Obama's Tire Tariff May Protect Unions but Harms the Nation - washingtonpost.com: "The 215 percent increase in tire

Cramer Freaks Out On The SEC Over Flash Trading (VIDEO)

Cramer Freaks Out On The SEC Over Flash Trading (VIDEO): "This time he comes down on the Securities and Exchange Commission's (SEC) flash trading crackdown, and makes a lot of sense.

Why the sudden interest in flash trading when the SEC continues to overlook so many much larger problems?

The powerful and mysterious brain circuitry that makes us love Google, Twitter, and texting. - By Emily Yoffe - Slate Magazine

The powerful and mysterious brain circuitry that makes us love Google, Twitter, and texting. - By Emily Yoffe - Slate Magazine: "It is an emotional state Panksepp tried many names for: curiosity, interest, foraging, anticipation, craving, expectancy. He finally settled on seeking. Panksepp has spent decades mapping the emotional systems of the brain he believes are shared by all mammals, and he

Drilling Down - Perceiving the Risk of Stock Picking - NYTimes.com

Drilling Down - Perceiving the Risk of Stock Picking - NYTimes.com: "Consider a stock that picks up 10 cents on even days of the month and loses that much on odd days. Now imagine, instead, a stock that picks up value until the midpoint of the month, and then sinks until the endpoint. Both stocks offer the same monthly and yearly return. But investors will tend to regard the first stock as safer

Kodak and KKR: Distressed Debt Investing 101 - Deal Journal - WSJ

Kodak and KKR: Distressed Debt Investing 101 - Deal Journal - WSJ: "KKR will buy up senior secured notes carrying interest rates as high has 10.5%, which is twice the blended interest rate that Kodak is paying on its current debtload. The firm will also receive warrants to convert the debt into 53 million Kodak shares.....KKR is essentially acting as a lender of last resort, while gaining the

Insider trading? Possibly

While the deal had been rumored, trading like this is at least suggestive of insider trading. Deal Journal - WSJ: "...it looks like somebody couldn’t keep quiet about the Perot deal, though it had been rumored to be in the works for many months. Dow Jones Newswires reports that starting Sept. 9 and continuing through Monday, traders bought and sold far more options in Perot Systems than they

Problems managing money may foreshadow Alzheimer's - Yahoo! News

Uh, so wait. While I doubt VERY strongly there is any causation here, I would suggest that you want to do your finance readings since you never know.Problems managing money may foreshadow Alzheimer's - Yahoo! News: "Problems with basic money management may serve as a sign that an older adult with mild memory impairment will soon progress to Alzheimer's disease, researchers reported Monday."

Using options as tools for hedging, 4 techniques available to anybody

Basic, but good intro! using options as tools for hedging, 4 techniques available to anybody:"Another reason to desire a hedge on a long position would be that you believe the market is going to correct, and stocks you own are going to go lower with it, but you still believe that in time the names you hold can move higher. A hedge can temper the short-term pain or even provide profts you can

Unpaid bills mount for top Chrysler executive - Yahoo! News

Unpaid bills mount for top Chrysler executive - Yahoo! News: "One of the best-known auto industry executives in the world has fallen on hard times.Jim Press, who briefly ran Toyota Motor Corp.'s U.S. operations and spent 37 years with the Japanese automaker before joining Chrysler as one of its three top executives in 2007, is facing claims of more than $1.35 million for unpaid federal taxes and

Fed Rejects Geithner Request for Study of Governance, Structure - Bloomberg.com

Well, then, this is heating up. Stay tuned, I doubt we have seen the end of this one.Fed Rejects Geithner Request for Study of Governance, Structure - Bloomberg.com: "The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.The Obama administration

The Financial Crisis and America’s Casino Culture - NYTimes.com

Interesting. The Financial Crisis and America’s Casino Culture - NYTimes.com: "“It goes all the way back to George Washington,” said Robert Shiller, the Yale economist who warned of the Internet and real estate bubbles, and whose book, “Irrational Exuberance,” remains a seminal text on Americans’ tendency to believe in good times. “Washington said regulation should be done with a light hand. The

Case study on paying off loans

Hat's off to the Hildebrandts. A good case study for personal finance!Yahoo! Finance - Business Finance, Stock Market, Quotes, News: "Five years ago, the Hildebrandt family of New Richmond, Wis., was juggling more than $100,000 in credit card and personal debt. Through frugality, determination and hard work, they are now -- other than a mortgage -- debt-free."The secret? Hard work, will power,

Did Wells Fargo's Auditors Miss Repurchase Risk? (WFC)

This is a good example of what you can sometimes unearth if you dive a little deeper than normal.Did Wells Fargo's Auditors Miss Repurchase Risk? (WFC): "On Friday, Clusterstock worried that Wells Fargo may be making the same fatal mistake AIG did – underestimating, or worse, naively ignoring Collateral Call Risk."

SEC’s Schapiro Sees More Public Disclosure for Hedge Funds - Bloomberg.com

This has been a major issue since I began teaching. Will be interesting to see if it happens whether hedge funds flee the country as some have threatened in the past.SEC’s Schapiro Sees More Public Disclosure for Hedge Funds - Bloomberg.com: "The U.S. Securities and Exchange Commission will urge more public disclosure from hedge funds if Congress follows through with plans to make the investment

The secret of self-control : The New Yorker

Patience is a virtue: Behavioral finance time anyone?The secret of self-control : The New Yorker: "Once Mischel began analyzing the results, he noticed that low delayers, the children who rang the bell quickly, seemed more likely to have behavioral problems, both in school and at home. They got lower S.A.T. scores. They struggled in stressful situations, often had trouble paying attention, and

S&P 500 Winners & Losers Since Lehman's Fall - CNBC By The Numbers - CNBC.com

S&P 500 Winners & Losers Since Lehman's Fall - CNBC By The Numbers - CNBC.com: "According to data compiled by CNBC, 412 companies in the U.S. equity index are trading in negative territory, with an average loss of 22%, since the date that Lehman's demise took effect. As no surprise, many financial companies are among the worst performers from a year ago"

10 Ways Sports Stars Destroy Their Finances

Clusterstocks' Business Insider's 10 Ways Sports Stars Destroy Their Finances: "A Sports Illustrated article this year showed how shockingly common financial ruin is: * By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress...... * Within five years of retirement, an estimated 60% of former NBA players are broke. * Numerous

How economists are tackling sports injuries

FT.com / Reportage - How economists are tackling sports injuries: "Brady’s story shows vividly how injury can affect a team, and in particular injury to a star player, whose performance is doubly critical. And since sport is increasingly obsessed by Freakonomics-style analysis, where economists and statisticians (and mere stats nuts) hunt for inefficiencies in the system, his case raises

Psychology of poverty and temptation – Chris Blattman

Psychology of poverty and temptation – Chris Blattman: "Some people are not only impulsive and impatient, but inconsistently so. they care a lot about a dollar today versus tomorrow, but could care less between getting a dollar either 10 or 11 days from now. Economists call this ‘hyperbolic discounting’.Both behaviors–impatience and time inconsistency–could be a source of persistent poverty.Or

SSRN-The Liquidity of Liquid Markets During the Financial Crisis by Craig Furfine

SSRN-The Liquidity of Liquid Markets During the Financial Crisis by Craig Furfine: "We measure changes to trading volumes, spreads, the level and shape of order books, and the price impact of a trade and document that these traditional measures imply a noticeable withdrawal of liquidity from Eurodollar futures markets, which previously could have been argued to be one of the most liquid financial

Is this common?

Was reading over the announcement and must confess I do not know if this is common or not: Anyone help me here?From Kodak's 8k announcing a new convertible sale:"Information Rights: For so long as KKR and certain related parties hold at least 10% of the common stock issued or issuable upon exercise of the Warrants it originally purchased pursuant to the Purchase Agreement, KKR shall have the

To Reduce Hedge Fund Risk, Let Everyone In - News Analysis - NYTimes.com

Steven M. Davidoff - To Reduce Hedge Fund Risk, Let Everyone In - News Analysis - NYTimes.com: "It is time to get serious about hedge fund risk. This, however, is not the usual argument for more regulation of hedge funds. Here is a contrarian view: the best course for our capital markets may actually be in the other direction. Perhaps hedge funds need to be deregulated, breaking down the wall

SU - Former Cub Shawon Dunston Demands Team Pay Him Promised College Money - The Two-Way - Breaking News, Analysis Blog : NPR

SU - Former Cub Shawon Dunston Demands Team Pay Him Promised College Money - The Two-Way - Breaking News, Analysis Blog : NPR: "Shawon Dunston, the former Chicago Cubs all-star shortstop, has offered an interesting reason why the Tribune Co. now in bankruptcy court, shouldn't be allowed by the judge to sell his old team: it still owes him scholarship money he was promised so that he could obtain

SSRN-Understanding the Growth of African Financial Markets by Mihasonirina Andrianaivo, Charles Amo Yartey

SSRN-Understanding the Growth of African Financial Markets by Mihasonirina Andrianaivo, Charles Amo Yartey: "This paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets. The results show that income level, creditor rights protection, financial repression, and political risk are the main determinants of banking

SSRN-From Behavioural to Emotional Corporate Finance: A New Research Direction by Richard Fairchild

Interesting: breaking behavioral finance down into finer groupings.SSRN-From Behavioural to Emotional Corporate Finance: A New Research Direction by Richard Fairchild: "Behavioural finance and behavioural corporate finance analyses the effects of psychological biases, heuristics, and emotions on investors’ and managers’ decision-making and performance. Taffler and Tuckett (2005) have introduced a

SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro

More evidence, this time from Italy, that last year's short selling bans did not achieve their desired reductions in volatility. SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro: "By analyzing the effect on daily price returns and volatility following the addition of short selling constrains, and using some

Survivor Bias on the Gridiron - Freakonomics Blog - NYTimes.com

Dubner brilliantly writes on the Survivorship Bias using sports as the example. It is good and thus I will include even though he has to bring up the Bills losing AGAIN.Survivor Bias on the Gridiron - Freakonomics Blog - NYTimes.com: "Over time, therefore, the DJIA reflects a different reality than many people presume. It is biased toward survivors — or, if you want to think of the concept more

Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009

Bodie has long advocated holding treasuries (technically TIPS) and if you really want to take risk using long term options).Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009: "Were retirement investors taking on too much risk before the crash?Yes. The standard models that are used to give investment advice to millions of Americans are fundamentally wrong. We're told that over

Stress Taints Decision Logic | Psych Central News

Stress Taints Decision Logic | Psych Central News: "Typically, we reflect on our past history to weigh the pros and cons of a choice, and then decide on the most logical option.A new study suggests this approach may need revision if we are under cognitive stress — the stress can serve as a distracting force and cause us to make poor decisions....The authors note that when we are stressed and need

Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports

I always like it when economics wins out! This is a perfect example of something many have been advocating for years:Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports: "This season, the Dallas Stars are the first NHL team to implement a system called 'dynamic pricing,' which is like variable pricing only it's determined with artificial intelligence

Guest Lecture by David Swensen Yale's Chief Investment Officer

In the week that Yale reported a 30% loss of their endowment, I thought it would be interesting to look at this guest lecture from David Swensen. It is unfortunate in a way that they lost so much, since his presentation and long run record had been very good. Indeed, Swensen has done very well over longer term windows:"The Yale endowment is led by David F. Swensen, who has advocated aggressive

YouTube - Authors@Google: Jeffrey Kluger

YouTube - Authors@Google: Jeffrey Kluger I am almost done with his book Simplexity.His discussions of traffic or escaping a disasters are fascinating and his whole work is a good reminder that few things are strictly linear.

The Greatest Sucker's Rally In History, Play By Play

How closely does history repeat itself?From the Business Insider at ClusterStock: The Greatest Sucker's Rally In History, Play By Play: "The early 1930 rally came after the market had fallen nearly 50% in the fall of 1929. That rally took the market up nearly 50% again, to a level that was only about 20% below the previous peak.That rally, of course, was also the biggest sucker's rally in

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org: "373 U.S. public companies reduced their chief executives' base salaries between June 1, 2008 and June 18, 2009. 68 companies in the Fortune 1000 index have reduced executive officers' base salaries in the past year."I am sort of disappointed but not sure why. I would have figured almost all did.

Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com

A look back by the NY Times at what went wrong:Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com: "What wasn’t recognized was the importance of a different species of risk — liquidity risk,” Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University, told The Times. “When trust in counterparties is lost, and markets

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com: "Moral hazard already existed in the system on at least three levels.First, bank employees and managers had asymmetric compensation structures.....Second, shareholders had the same payoff structure. Banks are highly leveraged institutions; every dollar contributed by shareholders is magnified

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling: "The real problem with asset allocation isn't that it no longer works, but that people expect that it will always work. And that's just not true. The 2000-02 bear showed that even sophisticated

FinanceProfessor and SBU in the Globeandmail.com: September rally like white shoes after Labour Day

Globeandmail.com: September rally like white shoes after Labour Day: "Like everyone else, investors 'give in to mood swings that lead to impulsive decisions,' says Jim Mahar, an associate finance professor at St. Bonaventure University in upstate New York. And it's why, despite our better judgment, we are still tempted to try to time the market and latch on to hot stocks, funds and trends.'The

Motives and Consequences Of Financial Regulation

The short version is that regulation often helps the Regulated and harms the poor. The Harvard Law School Forum on Corporate Governance and Financial Regulation » Motives and Consequences Of Financial Regulation:Fascinating piece that provides evidence of what we probably already knew: regulations can often hurt those they are designed to help. How? By preventing them access to markets and by

Might the rating agencies be in more trouble than originally thought?

The other day I mentioned this interview with Terry McGraw of McGraw-Hill who basically said that Moody's merely had it wrong and there was no fraud.

In this response, David Eihorn suggests that this "we messed up" defense may not be enough. Now that said, he is short the stocks of rating agencies so it is ironic that he is speaking on conflicts of interest, but it does bring up some serious

Kahneman speaking at Georgetown graduation

Daniel Kahneman is one of the main founders of the Behavioral Economics/Finance School. This is a short (19 min if you watch it all) graduation address that we used in class (Behavioral Finance). I recommend skipping the first section and get right to his talk on economic rationality.

In defense of markets---Thomas E. Woods, Jr. - Mises Institute

I have not mentioned the Mises Institute in a while. But this response is so thorough and so well thought out that I had to. It is a response piece to a person who does not favor free market responses. Thus, Mises plays the role of free market defender. It is a role that is played very well!Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute: "...no free-market economist

Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch

Have you heard of the Lazy Portfolios? They run a series of tests of what are essentially passive investment strategies vs active management. Well given behavioral finance is so hot, they decided to take on that. The result? Lazy wins again!Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch: "Does the 'Behavioral Edge ... earn superior returns?' No!Representing

Investment Mistakes: The View From Behavioral Finance - WSJ.com

Investment Mistakes: The View From Behavioral Finance - WSJ.com: "Why did we think and feel and behave as we did? Why did we act in a way that today, in hindsight, seems so obviously stupid? Only by understanding the answer to these questions can we begin to improve our financial future.This is where behavioral finance comes in. Most investors are intelligent people, neither irrational nor insane

McGraw Hill CEO: We Just Got It Wrong

From CNBC and Clusterstock: This was one of the more interesting CNBC interviews I have seen in a long time. The interview is with McGraw-Hill CEO Terry McGraw. In the interview Mr McGraw starts off talking about new tools for college classrooms but then it gets more exciting and he discusses the recent case in which a judge allowed rating agencies to be sued. McGraw stresses that there was

SSRN-Governance Matters VIII: Aggregate and Individual Governance Indicators, 1996-2008 by Daniel Kaufmann, Aart Kraay, Massimo Mastruzzi

Yes this will be used in class :)SSRN-Governance Matters VIII: Aggregate and Individual Governance Indicators, 1996-2008 by Daniel Kaufmann, Aart Kraay, Massimo Mastruzzi: "Abstract: This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice

SSRN-Short Sales, Limits to Arbitrage and Fundamental Value by Dirk Brounen, Melissa Porras Prado, Marno Verbeek

Score another for short sales!SSRN-Short Sales, Limits to Arbitrage and Fundamental Value by Dirk Brounen, Melissa Porras Prado, Marno Verbeek: "The presence of short sale constraints ensures that pessimistic investors' negative information is not reflected in the stock price as they are not able to sell short, short sales hamper the tendency of the optimist to bid up prices."

Rating agencies lose free-speech claim | Reuters

Rating agencies lose free-speech claim | Reuters: "'You can't yell fire in a crowded theater, but here it seems the agencies were doing the opposite,' said Jonathan Macey, a professor at Yale Law School. 'There was a fire, but they were saying there was nothing to worry about and taking money for saying that.'"

Football, Statistics, and Agency Problems « The Baseline Scenario

Agency costs occur when the agent looks out for his or her own interests and not those of whom hired him/her. The typical example of this is when manager looks out for his/her personal pay and not the returns of the shareholders. That said the world is full of examples of such conflicts. The Baseline Scenario provides a wonderful example using football. Specifically, the fact that football

Forbes: Bills lead league in value increase : Sports : The Buffalo News

Forbes: Bills lead league in value increase : Sports : The Buffalo News: "Forbes magazine has released its annual rankings of NFL franchises and their worth. The Bills are valued at $909 million, 26th in the league overall. They were 27th last season.Buffalo is one of four teams, with New England, Tampa Bay, San Diego, whose value is up 3 percent from 2008....The Dallas Cowboys are worth $1.65

SSRN-Capital Structure Decisions Around the World: Which Factors are Reliably Important? by Özde Öztekin

SSRN-Capital Structure Decisions Around the World: Which Factors are Reliably Important? by Özde Öztekin: "The most reliable determinants are past leverage, tangibility, firm size, research and development, depreciation expenses, industry median leverage, and liquidity. The signs of the reliable determinants give consistent support to the dynamic trade off theory."This one will definitely be

SSRN-CFOs and CEOs: Who Have the Most Influence on Earnings Management? by John (Xuefeng) Jiang, Kathy Petroni, Isabel Wang

SSRN-CFOs and CEOs: Who Have the Most Influence on Earnings Management? by John (Xuefeng) Jiang, Kathy Petroni, Isabel Wang: "Because CFOs’ primary responsibility is financial reporting, CFO incentives should play a stronger role than those of the CEO. We find that the magnitude of accruals and the likelihood of beating analyst forecasts are more sensitive to CFO equity incentives than to those

Tweets of the week

Have not done this in a while, but since class just started I figured I would point out some really cool tweets of note. Not very diversified today, but ran out of time and the transaction costs of diversification were too high.From Wayne Marr[Harvard HBS, BA680] How Marvel Went from Bankruptcy to $4B Buyout http://tinyurl.com/msr563[SSRN] CFOs and CEOs: Who have the most Influence on earnings

We're All Predictably Irrational - Dan Ariely

YouTube - We're All Predictably Irrational - Dan Ariely: "Dan Ariely, a professor of behavioral economics at Duke University, presents examples of cognitive illusions that help illustrate why humans make predictably irrational decisions."Just used this in class. It is excellent!

How to Lose $3 Million in Six Years - Yahoo! Buzz

The Buzz Log - How to Lose $3 Million in Six Years - Yahoo! Buzz:"Callie Rogers was just 16 when she won a whopping $3 million in the lottery. Six years later, she reports that she blew untold sums on drugs, partying, exotic cars, and breast implants. A staggering $730,000 went to designer clothes alone, Ms. Rogers explains in an article from AOL. Says Rogers: 'I honestly wish I'd never won the

Greg Mankiw's Blog: An Impossible Task

I am embarrassed that I have read so few of them! I guess I know what I better do this year!Greg Mankiw's Blog: An Impossible Task: "For those blog readers who might be interested in what the seminar will be reading, here is the list of books: * The Worldly Philosophers, by Robert Heilbroner * Spin-Free Economics, by Nariman Behravesh * Capitalism and Freedom, by Milton Friedman *

Greg Mankiw's Blog: An Impossible Task

I am embarrassed that I have read so few of them! I guess I know what I better do this year!Greg Mankiw's Blog: An Impossible Task: "For those blog readers who might be interested in what the seminar will be reading, here is the list of books: * The Worldly Philosophers, by Robert Heilbroner * Spin-Free Economics, by Nariman Behravesh * Capitalism and Freedom, by Milton Friedman *

Stalking Horse Bid

Here is a new term for many of you: "Stalking Horse Bid".What is a stalking horse bid? It is used in bankruptcies when there is a buyer has placed a bid to purchase in advance of a public auction. The purchase is contingent on not getting a higher bid in the auction. So in essence the stalking horse bid is just the first bid that sets the lowest price the sale will generate. From a

As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit - NYTimes.com

As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit - NYTimes.com: "The government has taken profits of about $1.4 billion on its investment in Goldman Sachs, $1.3 billion on Morgan Stanley and $414 million on American Express. The five other banks that repaid the government — Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T — each brought in $100 million to

The Next Step for Microfinance: Taking Deposits - TIME

The Next Step for Microfinance: Taking Deposits - TIME: "Early adopters of what's sometimes called savings-led microfinance find that the demand for savings accounts far outstrips the demand for loans. Bank Rakyat in Indonesia, for instance, has 10 savers for every one borrower. 'Low-income people need a variety of financial services,' says Bob Christen, director of the financial services group

Baylor University || Marketing & Communications || News

Congratulations to James Garven!Baylor University || Marketing & Communications || News: "What sets Dr. Garven apart is his unique teaching methods and genuine care and concern for his students,' said Katie Emler, a 2009 Baylor graduate who earned her BBA in risk management and insurance. 'Rumors had circulated about Garven being the hardest professor in the business school, and others that

Lucian Bebchuk: Bonus Guarantees Can Fuel Risky Moves - WSJ.com

Lucian Bebchuk: Bonus Guarantees Can Fuel Risky Moves - WSJ.com: "Guaranteed bonuses create perverse incentives to take excessive risks, and they consequently could well be worse for incentives than straight salary.Introducing a guarantee into a bonus plan eliminates some downside risk but leaves the bonus compensation sensitive to performance on the upside."In effect these guaranteed bonus plans

Aer Lingus, Ailing, Open to Another Ryanair Bid - NYTimes.com

Short version: Aer Lingus said "no" to two takeovers, now saying "maybe" when they find that they are not doing as well as they had hoped.Aer Lingus, Ailing, Open to Another Ryanair Bid - NYTimes.com: "Rapidly using its cash and unable to stem a decline in revenue, Ireland’s former flag carrier Aer Lingus softened its stance on Thursday toward a possible deal with Ryanair, the discount airline

Interesting interview on Behavioral Finance from The Economist

Online video and audio: programmes and multimedia | The Economist

The Economics of Doing What You Love - Freakonomics Blog - NYTimes.com

The Economics of Doing What You Love - Freakonomics Blog - NYTimes.com: "...despite this cost, running is still worth it. Why? There are many other choices that non-economists make that come with an even worse cost-benefit ratio. The true advantage of thinking like an economist is that it can help you make better decisions"Of course...there is no other way to thing! EVERYONE should take

FDIC List of Problem Banks Surges, Putting Reserve Fund at Risk - Bloomberg.com

Something else to worry about? Probably not.FDIC List of Problem Banks Surges, Putting Reserve Fund at Risk - Bloomberg.com: "The U.S. added 111 lenders to its list of “problem banks,” a jump that suggests rising bank failures may force the Federal Deposit Insurance Corp. to deplete a reserve fund that shrank 40 percent this year."Of course the Treasury would bail them out if necessary, but for

The Economics of Loneliness - Economix Blog - NYTimes.com

The Economics of Loneliness - Economix Blog - NYTimes.com: " Harvard's Edward Glaeser has a good piece in a recent NY Times that looks how people's interaction is not forgotten by (financial) economists."Economists are not believers in the virtues of lone wolves. Economics should be seen as a discipline that has spent centuries chronicling the enormous gains that come from people connecting with

ABC's John Stossel Destroys/Pulverizes/Crushes Obama's anti-American 'Health Care' Plan

I thought long and hard about touching this very political issue, but given that it is so important, I opted to make some enemies. Remember there is an important reason profit driven organizations excel! This is not to say that it is perfect, but wow we can't throw the baby with the wash.YouTube - ABC's John Stossel Destroys/Pulverizes/Crushes Obama's anti-American 'Health Care' PlanHT to

Bernanke Is Nominated for Second Term as Fed Chief (Update2) - Bloomberg.com

Well it is official:Bernanke Is Nominated for Second Term as Fed Chief (Update2) - Bloomberg.com: "“Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and out-of-the box thinking that has helped put the brakes on our economic freefall,” Obama said in Martha’s Vineyard, Massachusetts, with Bernanke at his side.Bernanke’s nomination for a second

Angry Pitcher Becomes Hedgie

Angry Pitcher Becomes Hedgie: "Former major league pitcher Todd Stottlemyre -- an ex-member of the Toronto Blue Jays, Oakland Athletics, St. Louis Cardinals, Texas Rangers and Arizona Diamondbacks -- recently launched Desert Shores Capital, a hedge fund focusing on fast-paced momentum trading:"

The Psy-Fi Blog: The Special Theory of Behavioural Finance

While this maybe a bit strong, the piece will definitely be required reading for my Behavioral Finance Class this semester.The Psy-Fi Blog: The Special Theory of Behavioural Finance: "The Efficient Market Hypothesis (EMH) enshrines the spurious quest for precision...The beauty of classical financial economics is that it allows just this sort of modelling – once you've made the necessary

Google’s I.P.O., Five Years Later - DealBook Blog - NYTimes.com

Google’s I.P.O., Five Years Later - DealBook Blog - NYTimes.com: "Five years ago today, Google sold shares to the public for the first time in what was one of Silicon Valley’s most discussed, dissected and debated initial public offerings of stock. Its debut on the Nasdaq market on Aug. 19, 2004, came after numerous twists and turns, including a Playboy magazine interview with the company’s

After a 30-Year Run, Rise of the Super-Rich Hits a Wall - NYTimes.com

After a 30-Year Run, Rise of the Super-Rich Hits a Wall - NYTimes.com: "Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the

A look at Value at Risk

Funds Europe: "VaR is simply a financial weather forecast. A high VaR suggests stormy weather and the risk of big losses, while a low VaR indicates a balmy day and rain, in the form of big losses, is not likely. But VaR, using its full name, has a misleading description. ‘Value at risk’ sounds like it is communicating the maximum rainfall rather than just an idea of whether a rainstorm is likely.

Video: MBA Ethics Oath | The Daily Show | Comedy Central

Video: MBA Ethics Oath | The Daily Show | Comedy Central: "John Oliver enlists the help of a former convict to convince business students to sign an ethics oath."I apologize for the language, so watch at your own risk, but it is VERY VERY funny.The Daily Show With Jon StewartMon - Thurs 11p / 10cMBA Ethics Oathwww.thedailyshow.comDaily Show Full EpisodesPolitical HumorHealthcare Protests

A conversation with author Jim Collins

Charlie Rose - A conversation with author Jim Collins: "A conversation with author Jim Collins"For some reason I can not embed this but here is the temporary video link. I definitely recommend you watch it. Excellent and thought provoking. Collins previously has written Good to Great. If I were the author of his new one, I might have at least subtitled it: From Great to Bad.Briefly: why is it

After slow start, more IPOs predicted in 2009

The Associated Press: After slow start, more IPOs predicted in 2009:I can't quote from it since it is an AP piece, but the article quotes Jay Ritter who suggests that I{Os will pick up to about 3 per month.

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Comment Letter of Eighty Professors of Law, Business, Economics, or Finance in Favor of Facilitating Shareholde

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Comment Letter of Eighty Professors of Law, Business, Economics, or Finance in Favor of Facilitating Shareholde: "Lucian Bebchuk, Harvard Law School, on Tuesday August 18, 2009 at 9:18 amI submitted to the SEC yesterday a comment letter on behalf of a bi-partisan group of eighty professors of law, business, economics,

Nope, Shareholders Shouldn’t Be More Involved With Executive Pay | Investing to Wealth

This one will undoubtedly spur some good conversations in class this fall.Nope, Shareholders Shouldn’t Be More Involved With Executive Pay | Investing to Wealth: "Why don't shareholders care more? Shareholder apathy is completely rational because diversified shareholders lack an incentive to become overly familiar with the operations of individual companies. They own a diversified portfolio of

Strategies - Buy and Hold, or Buy and Fold. But Don’t Waver. - NYTimes.com

Strategies - Buy and Hold, or Buy and Fold. But Don’t Waver. - NYTimes.com: "In a liquidity crisis, as we have seen all too recently, a sudden tightening of credit sets off a vicious cycle of margin calls that lead to forced sales, which in turn cause asset prices to plunge, and so on. Invariably, the abruptness and severity of the crisis test the emotional and financial reserves of investors.In

Simoleon Sense » Blog Archive » Asset Mispricing Due to Cognitive Dissonance

Simoleon Sense » Blog Archive » Asset Mispricing Due to Cognitive Dissonance: "My favorite concept from this paper: “To alleviate cognitive dissonance, investors endogenously choose to ignore information that conflicts too much with their ex ante expectations.”"We see what we want to see.

Economics focus: In defence of the dismal science | The Economist

Economics focus: In defence of the dismal science | The Economist: "Over the years exceptions and “anomalies” have been discovered (even tiny departures are interesting if you are managing enough money) but for the purposes of macroeconomic analysis and forecasting these departures are too small to matter. The main lesson we should take away from the EMH for policymaking purposes is the futility

Wall Street bankers are still raking in billions in bonuses - USATODAY.com

Wall Street bankers are still raking in billions in bonuses - USATODAY.com: "Wall Street banks typically set aside more for compensation than other industries — about 50% of revenue to pay employees. However, the largest companies that make up the S&P 500 spend less than 22% of revenue on all indirect costs, which includes salaries, commissions and other overhead, according to a USA TODAY

Effort to Rein In Pay on Wall Street Hits New Hurdle - NYTimes.com

Isn't a guaranteed bonus, just a salary?Effort to Rein In Pay on Wall Street Hits New Hurdle - NYTimes.com: "A guaranteed bonus might strike many people as a contradiction in terms. But on Wall Street, banks have become so eager to lure and keep top deal makers and traders that they are reviving the practice of offering ironclad, multimillion-dollar payouts — guaranteed, no matter how an employee

Surprise! Analysts Can't Predict The Future

And this is a surprise, why???From Clusterstock:Surprise! Analysts Can't Predict The Future: "Most investment economic analysis is devoted to forecasting the future. Unfortunately, the evidence is in...and it's clear that people can't forecast the future."

Hedge Funds? Only if You Like Lots of Risk - You’re the Boss Blog - NYTimes.com

Great introductory (or even intermediate) article on Hedge Funds.Hedge Funds? Only if You Like Lots of Risk - You’re the Boss Blog - NYTimes.com: "Hedge funds are meant for people who know what they are doing, people accustomed to putting real money at risk. Federal law permits investment only by “accredited investors” — generally people with annual incomes of at least $200,000 for singles,

Bank Balances Shift With Rule Changes - washingtonpost.com

If you remember back in April, FASB decided firms did not need to mark their assets to market. Well it obviously allowed firms to report higher earnings than they otherwise would have. But now it seems that FASB might be having a change of heart.Bank Balances Shift With Rule Changes - washingtonpost.com: "...found that 45 financial firms reported higher first-quarter earnings because of the

Had a request about yesterday's blog entry

Had a reader ask about the "temptation is stronger than we think" blog entry of yesterday. Specifically about this part"Dan Ariely makes a big point of this in his Predictably Irrational book. Specifically chapter 5 in which he reports on various questionnaires (but not actual behavior) that were filled out under various states of, uh, arousal. (I am not going to go into details, but suffice to

Thaler on the lack of market efficiency

Nudge blog: "...if we include the earlier bubble in Japanese real estate, we have now had three enormous price distortions in recent memory. They led to misallocations of resources measured in the trillions and, in the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be “right”, then these bubbles would not occur. But they have, so what are we to do?"

Runaway Train? - Freakonomics Blog - NYTimes.com

The discussion from Freakonomics is about high-speed rail ways and the fear that once we begin down the track (sorry I could not resist) we will never consider the economics of it. That said, the following quote is a perfect example of why even die-hard classical economists (Thaler's "Econs") are admitting that behavioral finance/economics does play a role in decision making.Runaway Train? -

Research shows temptation more powerful than individuals realize

Lead me not into temptation? Is the "Lord's Prayer" good for financial advice? Ok, so that is probably taking things too far, but the basic idea is that we tend to give into you temptation more than we think we will.Research shows temptation more powerful than individuals realize: "The study, led by Loran Nordgren, senior lecturer of management and organizations at the Kellogg School, examined

Fed Trifecta for University of Chicago Students - Real Time Economics - WSJ

I confess Money and Banking was not my favorite course (to take or to teach--have not taught in in the new post crisis world), but I sure would like to sit in on this one:Fed Trifecta for University of Chicago Students - Real Time Economics - WSJ: "The course will be taught by Randall Kroszner, who stepped down in January as a Fed governor. Their textbook will be one authored by Frederic Mishkin,

Scaling the Heights of Corporate Greed: Chafkin and Lo on Risk - Freakonomics Blog - NYTimes.com

Great read! You will love the analogy to the Mount Hood tragedy (and if you teach will likely use it in class).Scaling the Heights of Corporate Greed: Chafkin and Lo on Risk - Freakonomics Blog - NYTimes.com: "Much of neoclassical economics is based on the assumption that individuals act rationally and that markets fully reflect all available information, i.e., markets are informationally

Thaler vs Posner on Consumer Financial Protections

This is excellent.If you have been following the controversy about consumer Financial Protection at all you probably know that the administration has asked for simpler and safer products. This has angered many on each side.For instance (From NPR) Fed Chair Bernanke and US treasury Secretary Geithner have taken different sides in the issue:"The White House wants to create a new Consumer

TraderFeed: Trading Addiction: The Side of Trading That Few People Discuss

I have thought this before and thought we mentioned it but a quick search could not find it, so will include again. It does fit the behavior you see regularly with traders. They crave the adrenalin rush and the "fun" that comes with trading.TraderFeed: Trading Addiction: The Side of Trading That Few People Discuss: "Take the trader who loses money in a downward spiral through the day, without

BBC World Service - Business - Does microlending really help the poor?

BBC World Service - Business - Does microlending really help the poor?: "Academics have been trying to work out from the evidence whether microcredit does actually raise people's incomes.But it's been hard to do a proper scientific survey, since you need to compare those who do get a loan with a control group of similar people who don't.Dean Karlan, professor of economics at Yale University, has

A look at whether futures market contracts inpact spot pricing

Interesting:FRB: FEDS Abstract 2009-29: "This paper finds no evidence that speculative activity in futures markets for industrial metals caused higher spot prices in recent years. The empirical analysis focuses on industrial metals with and without futures contracts........comovement between metals with and without futures contracts has not weakened in recent years as speculative activity has

Whose house is this? "He must know nothing about finance"

This is hilarious.The Daily Show With Jon StewartMon - Thurs 11p / 10cHome Crisis Investigationwww.thedailyshow.comDaily ShowFull EpisodesPolitical HumorJoke of the DayThanks to Greg Mankiw for the link via WayneMarr

House Panel Approves Restraints on Executive Pay - NYTimes.com

House Panel Approves Restraints on Executive Pay - NYTimes.com: "The bill does not set pay limits. Instead, it gives shareholders the right to vote on pay and requires that independent directors from outside of management serve on compensation committees.The shareholder votes would not be binding on company management.The measure tries to reduce the potential conflicts of interest involving

SSRN-House Prices and Fundamentals: 355 Years of Evidence by Brent Ambrose, Piet Eichholtz, Thies Lindenthal

As a part time landlord, I will definitely agree with this this one. I am not sure the reason, but rent prices take much longer to adjust than do real estate prices. Now we have 355 years of data (amazing btw) to back up that statement.SSRN-House Prices and Fundamentals: 355 Years of Evidence by Brent Ambrose, Piet Eichholtz, Thies Lindenthal: "This paper examines the long run relation between

YouTube - Inflation or Deflation?

Ok, another song. I had never hear this one either. Pretty funny but so bad. LOL. By Merle Hazzard and Bretton Woods. lol.YouTube - Inflation or Deflation?: "Inflation or Deflation? "BTW if you can decide between inflation or deflation, vote on the front page of FinanceProfessorblog.blogspot.com

H-E-D-G-E song

No one will ever confuse this with a country classic, but it is very funny and actually is all about finance. Thanks to PlanetMoney for the tweet.

Rethinking Brownian Motion With The 'Emperor's New Clothes'

Thinking back to the classes that covered this, I NEVER thought Brownian Motion would be interesting but this is.....Rethinking Brownian Motion With The 'Emperor's New Clothes': "'Like Einstein, we used to think we could describe Brownian motion with a standard bell-shaped curve,' Granick said. 'But now, with the ability to measure very small distances much more precisely than was possible 100

Bernanke Feared a Second Great Depression - WSJ.com

Bernanke Feared a Second Great Depression - WSJ.com: "Federal Reserve Chairman Ben Bernanke on Sunday said he engineered the central bank's controversial actions over the past year because 'I was not going to be the Federal Reserve chairman who presided over the second Great Depression.....And later:"Mr. Bernanke responded that "nothing made me more frustrated, more angry, than having to

Is Your iPod Unpatriotic? Why America Shouldn't "Buy American"

A well-done piece showing the silliness of trying to only "Buy American" on many(indeed most) items. As much as some may not like it, it is an integrated world. (Uh I should worn you, their are bikini clad women (and one man), not sure if you want to watch at work or not.)YouTube - Is Your iPod Unpatriotic? Why America Shouldn't "Buy American": "Is your iPod unpatriotic? Its 451 parts are made

Can Lance Armstrong Save RadioShack?

If you missed it this week, Lance and Radio Shack teamed up for next year.Yes this is the same RadioShack that the Onion lampooned back in 2007 joking that even their CEO can't understand how they are in business.So can Lance turn their fortunes around? What does the market think? There was no impact on the announcement of the deal (12:00 on Thursday) which was timed to correspond with the

Seven banks were closed today. Is that a big number?

I just tweeted this but I am so amazed I have to report it here too.Seven banks failed today. That is more the same number as were reported on July 2. But for a recent history perspective it is quite high.Indeed from January 1 2000 to December 31, 2008 53 banks failed.Data from FDICBank Failing July 24, 2009: 7Bank Failings per year2000 022001

Did Goldman learn anything? Did shareholders?

Asymmetric and short-term oriented pay packages have largely been seen as major causes of the financial meltdown we saw last year. So since everyone has seen the problems, we are no longer going to pay people in the same manner. Right? Well, hold on, not so fast.First from the NY Times:"Goldman posted the richest quarterly profit in its 140-year history and, to the envy of its rivals,

Banning ‘Naked’ Default Swaps May Raise Corporate Funding Costs - Bloomberg.com

What's next? No "Skinny Dipping?"Ok, before I get fired, let me explain. Naked trading is when a speculator trades a derivative security without a position in the underlying asset. For instance, if I were to short a corn futures contract, I would be "naked" since I do not own corn to sell. So prior to settlement I either have to buy back the contract or purchase corn to cover the trade. (The

Buffett’s Goldman Stake Pays Richly - DealBook Blog - NYTimes.com

Buffett’s Goldman Stake Pays Richly - DealBook Blog - NYTimes.com: "Mr. Buffett’s stake in Goldman is now worth $9.1 billion, or about $4.1 billion more than what he paid 10 months ago, according to an analysis by Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette.According to Mr. Wilson’s calculations, Mr. Buffett would realize an annualized return of

Catching up with MicroFinance

A while ago (May 28th) we discussed a paper that claimed to be the first randomized study proving microfinance did not seem to work . The conclusion of that was that such studies that the studies could not be definitive. Specifically:"...more research is needed to determine what about microfinance works (or under what conditions), and when it does not."This morning I had several follow ups

SSRN-Dark Omens in the Sky: Do Superstitious Beliefs Affect Investment Decisions? by Gabriele Lepori

Rabbits feet, avoiding black cats and not walking under ladders, baseball players jumping foul line and refusing to talk to pitchers with no-hitters going, and not buying stocks? Who knew? SSRN-Dark Omens in the Sky: Do Superstitious Beliefs Affect Investment Decisions? by Gabriele Lepori: "...empirical analysis focuses on some beliefs associated with eclipses, phenomena that are typically

Two great calculators from PoliticalCalculations

In prepping for a class today, I found these. They are literally perfect for any introductory finance class as well as for investors who are just curious.1. Historic Rates of return from any two points of time: It really is important to realize that the past may not repeat itself. From PoliticalCalculations:" Now however, everything has changed because we here at Political Calculations

Behavioral Finance: The Role of Psychology

From Yale's Econ 252 classYouTube - 7. Behavioral Finance: The Role of Psychology: "Behavioral Finance is a relatively recent revolution in finance that applies insights from all of the social sciences to finance. New decision-making models incorporate psychology and sociology, among other disciplines, to explain economic and financial phenomenon, such as erratic stock price variations.

FT.com | Willem Buiter's Maverecon | What to do with the Fed

Phenomenal piece. Great work by Willem Buiter for the Financial Times.The article is on the problems the Fed has had, but stressed that that while flawed, it is still important not to let it lose its independence.Read it all. It is long, but very well done.I will give a few tidbits to tempt you to read the whole thing. It really is worth it.FT.com | Willem Buiter's Maverecon | What to do with

Embracing the efficient market hypothesis can be a bit like stepping out on “the Ledge” « Nudge blog

GREAT article from the Nudge blog/Economist.Embracing the efficient market hypothesis can be a bit like stepping out on “the Ledge” « Nudge blog:"...in the wake of last fall’s stock market collapse, fully embracing the efficient market hypothesis can be a scary proposition – a bit like stepping out on “the Ledge” at Willis Tower. (An absolute must if you’re in Chicago, by the way.) The events of

Balancing Financial Innovation and Consumer Protection - NYTimes.com

Robert Shiller in the NY TimesEconomic View - Balancing Financial Innovation and Consumer Protection - NYTimes.com:"That is how innovation often proceeds — by learning from errors and hazards and gradually conquering problems through devices of increasing complexity and sophistication."then"We need consumer products that people can use properly, and if this is what “plain vanilla” means, that’s a

The Scholarship of Collapse | Gregor.us

I attack most things by beginning with the worst case scenario and going from there. And while this may not be the worst case scenario, I think you can see it from here.And I should warn you, that if you are from the US, this version could hurt. The Scholarship of Collapse | Gregor.us: "The June issue of Gregor.us Monthly, The Scholarship of Collapse, addresses several views of economic and

Lauren Cohen FinanceProfessor/ Star Weight Lifter

LOVE IT! I have always said FinanceProfessors are the coolest people on earth. Well except me.Harvard professor tackles economics and strongman competitions - The Boston Globe: "Lauren Cohen’s hands hint at his double life. Overworked veins bulge beneath the Harvard Business School professor’s skin, calluses mark his fingers, and his shins - covered by the pleated pants he wears for work - are

Calpers Sues Over Ratings of Securities - NYTimes.com

Well we all knew this was coming from some large investor and no one should be surprised it comes from Calpers.!Calpers Sues Over Ratings of Securities - NYTimes.com: "Calpers maintains that in giving these packages of securities the agencies’ highest credit rating, the three top ratings agencies — Moody’s Investors Service, Standard & Poor’s and Fitch — “made negligent misrepresentation” to the