Monday, March 24, 2008

Catching up-Newletter style

Catching up.

There is just not enough time in the day to do all I want to do. So given that it is break (we go back tomorrow) I will try to clear a few of the articles I wanted to mention as well as give you some book ideas and some random thoughts that I wanted to put out there as well.

* NCAA March Madness is a learning/teaching opportunity to discuss the relative effectiveness of stock picking vs. passive investing. Why pick upsets? Because it is fun. Boring but generally better strategy? Pick favorites. From Forbes two years ago.

* Recently JP Morgan officials asked their competitors to not hire Bear brokers away. Uh, ok. Of course he can say it, but why would anyone listen? If it works, I suggest that the professional sports teams try the same strategy when it comes to losing free agents.

* Implied Volatility (even with its acknowledged increase with the increased leverage that accompanies stock price declines) might resolve the issue of what happened to Andersen audited firms better than just using stock prices. This issue, which I hadn’t thought about in quite a while, was brought back into the spotlight (flashlight? Lol) by a new paper by Nelson, Price and Rountree that finds that Andersen audited firms were concentrated in industries that all went down and that Andersen's reputation may not have been to blame. Oh yeah, here is a bad paper that does use implied volatility to get around this problem somewhat.

* Insider trading does not pay. Even when it is a group of finance professors (at least former finance professors) doing it. From the SEC:

"The SEC's complaint alleges that Marshall received detailed and current information regarding the highly confidential ISE-Eurex merger talks, and tipped Tucker and Larson. According to the complaint, Tucker and Larson then purchased ISE securities resulting in illegal profits totaling approximately $1.1 million and $31,000, respectively."

* I have been reading several books that are either finance oriented or at least have valuable financial lessons:

Predictably Irrational by Dan Ariely. Great for class examples of Behavioral Finance. And really fun read. I think it is better than Freakonomics (sorry Steve).

Gatekeepers: the Professions and Corporate Governance by John Coffee Jr. Almost perfect for my corporate governance recap that I do in my corporate finance classes.

Men of Fire: Ristening to this one. Yeah it is about the US Civil War, but it again shows how misaligned incentives and poor management can make a huge difference. Even in war, agency costs matter!

* We just got a Bloomberg machine. I'd be really interested to hear how some of you use it for class.

* And finally a request. If you are from the Buffalo area, we’d love to have your help in the first ever BonaResponds Buffalo Service Day. It is this Saturday! While BonaResponds has built its name on trips to the Gulf Coast, it is also very active locally and has contributed approximately a quarter of a million dollars of services since August 2006 (which is after our “big” trip) with virtually no University Funding. BonaResponds is open to everyone and a whole lot of fun in addition to doing much good. So if you are local come on out and volunteer! (if you are not local but want to help you can always donate or better yet meet us for our next trip).

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