Behavorial Accounting? Executive Overconfidence and the Slippery Slope to Fraud by Catherine Schrand, Sarah Zechman

SSRN-Executive Overconfidence and the Slippery Slope to Fraud by Catherine Schrand, Sarah Zechman: Interesting paper.First from the abstract:"...executive overconfidence increases the likelihood that a firm commits financial reporting fraud. A manager that faces an earnings shortfall is more likely to manage earnings to overcome it if he believes the shortfall is temporary and, hence, the

The Bailout Game | Home

The Bailout Game | Home-- Ok, forget academic finance, this is good and funny! You can decide whether to bail out the various players or let them fail. Takes a second to load but is really well done!Thanks to Charlie (a former student) for sending this along to me.

Spotlight on Bonuses

It seems like everyone's attention has turned to pay and bonuses at Financial Institutions, so I will at least temporarily join the crowd.To set the stage, this is just a sampling of the 3,745 news items (according to Google) today alone that dealt with Wall Street bonusesFrom What Red Ink? Wall Street Paid Fat Bonuses-NY Times."Despite crippling losses, multibillion-dollar bailouts and the

Financial Rounds: Biases in Implied Volatilities

I will TRY to get to this later, but it is so important (yeah I am biased--I like implied volatilities) that I did not want to take any chances of getting busy and not getting to it AND besides it is a good opportunity to suggest new readers take a look at Financial Rounds. It is one of my favorites and written by another FinanceProfessor (who goes by the Unknown professor).Financial Rounds:

Google Trends: unemployment

With thousands of jobs being lost daily, thought it might be interesting to look at the number of searches for unemployment being done on Google. Not surprisingly the searches are way up (about 3 times as high as a few years ago). Google Trends: unemployment: "Scale is based on the average traffic of unemployment from United States"

Commentary: How to rescue the bank bailout - CNN.com

Joseph Stiglitz has a thoughtful piece on CNN.com. While I disagree with what appears to be a call for the nationalization of more banks, I do agree that rewarding upside without some real downside risk will only yield more risky behavior which will hurt the economy and lead to future blow-ups. My solution I guess would be to both allow temporary nationalizations (but with a hard fast exit date

DAVOS 2009 - DealBook Blog - NYTimes.com

Davos always creates good news items, interviews, and even class discussions. Keep on eye on the NY Times blog from the festivities.DAVOS 2009 - DealBook Blog - NYTimes.com: "A team of reporters and editors from The New York Times and The International Herald Tribune will be in Davos, Switzerland, reporting on World Economic Forum Annual Meeting 2009 from Jan. 28 to Feb. 1. The conference brings

SSRN-Moral Hazard in Leasing Contracts: Evidence from the New York City Taxi Industry by Henry Schneider

Great for class! Interesting, memorable, and on a topic which students often find boring and forgetful.Leasing is an important, but understudied method of financing a wide range of assets. Unlike owning an asset where the owner of the asset is also the user of the asset, in a lease (and also in a rental agreement), the asset is used by one party (lessee) and only reverts to the lessor after

RGE - Everything You Wanted to Know about Credit Default Swaps--but Were Never Told

Ok, this is a clear case of substance over form. Great material, but challenging to compress in the few minutes (ok, so negative minutes-but I am always late, so?? ) I have before I have to go to a meeting. BUT it is very good and I definitely recommend looking over it. I will try to summarize later. Two look-ins nowRGE - Everything You Wanted to Know about Credit Default Swaps--but Were Never

Peter Schiff's Clients Down In 2008

Remember Peter Schiff? How he called the market collapse? If you don't, here is the link to his video that was spotlighted last fall.Well, it appears that while he seemingly called that correctly, he has not been as good at making money on the call.From Clusterstock: Peter Schiff's Clients Down In 2008: ".... several clients who claim losses of 40%-70% after investing with EuroPacificCapital.

SFA 2009 Annual Meetings

What are you doing this coming November? How about going to the Southern Finance Association Annual meetings? The deadline for paper submission is coming up. SFA 2009 Annual Meetings: "Southern Finance Association Annual Meetings November 18 - 21, 2009""Interested in presenting a research manuscript, or organizing a special session, a panel discussion or a tutorial?Please complete and submit

FinanceProfessor.com Podcast

FinanceProfessor.com Podcast-Let's see if this goes better this time around. I tried it a few years ago and very few students used it, but it seems like it should at least help those who miss class. So I will begin posting MBA 610 lectures again this semester. The notes (always a work in progress) for the class are largely here.

The role of Speculation on oil prices

60 Minutes recently did a piece on the impact of speculators on oil prices that is worth some attention.Did Speculation Fuel Oil Price Swings?, 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand - CBS News: "'Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the

Why Economics Is Important! (Mises & Keynes, Think So!) | Simoleon Sense

SimoleonSense has the following great piece. Why Economics Is Important! (Mises & Keynes, Think So!) | Simoleon Sense: "Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence…”“In such vital

Holy Agency Costs Bat Man

Wow. Talk about your agency cost problems.$1.2 Million Spent On John Thain's Office: "Amidst everything else going on at Bank of America (BAC) and its boneheaded decision to buy dying Merrill Lynch, Gasparino reports, for the Daily Beast, that John Thain had a ridiculous amount spent on his own perks, including a redecorating of his office.According to documents reviewed by The Daily Beast,

Lesson One: What Really Lies Behind the Financial Crisis? - Knowledge@Wharton

It is a simple rule, but like many other rules, there is a great temptation to break it. If you are a financial intermediary you should not take positions (i.e. buy and hold), but merely work as a conduit. You make your profits on transactions not market moves. A mental literature review of this idea goes back at least to Hasbrouck and Sofianos (1993) and Madhaven and Sofianos (1998). (True

Back to class and back to blogging

Well it is time to restart our engines. It has been a while. Texas went great. Really got a great deal done. I would encourage others to go volunteer in the area. It may set your pocket book back a bit, but well worth the price. You will help others.Ok, so fast recap. When classes ended the Dow was at about 8500 it rose to a bit over 9,000 at the start of the year and is now down to about

One Fund, 10 Years, No Annual Losses | Mutual Funds Update | Financial Articles & Investing News | TheStreet.com

Interesting trivia:One Fund, 10 Years, No Annual Losses | Mutual Funds Update | Financial Articles & Investing News | TheStreet.com: "....TheStreet.com Ratings team combed its database of open-end equity and hybrid mutual funds to search for such a performer. Astoundingly, we uncovered a single fund that has not suffered an annual loss over the most recent 10 years.The GMO Alpha Only Fund III (

Where in the world are you?

hey folks, I am fine. Thanks for the concern. It is just that I am working with BonaResponds in Bridge City for about 2 weeks. You can read what we are doing on our BonaResponds blog.

Why We Take Risks — It's the Dopamine - TIME

We know that most investors are risk averse, but in spite of that, many of us take risks that rationally may not make sense. In class we have generally explained this via a catch-all "Its fun" and people maximize utility not a risk adjusted return. From science we now have a better grasp on the "it's fun". From Time: Why We Take Risks — It's the Dopamine - TIME: "A new study by researchers at

Putting Bernie Madoff On The Couch - TIME

While it is not a finance article per se, it is interesting and relevant for any class discussion on the Madoff case specifically and many frauds more generally. Especially since it does not fit normal (i.e. rational) economic models.Putting Bernie Madoff On The Couch - TIME: "No matter how grand your ill-gotten Bentley or your cooked-books villa, they have to be hard to enjoy when you know that