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,