theexchang e · 2018. 11. 9. · news from the financial economics institute at claremont mckenna...

N EWS F ROM T H E F I N AN C I A L E CONOM I C S I N S T I T U T E AT C L A R EMONT MCK ENNA CO L L E G E

In This Issue:PG 2: Directors’ Report Continued; FEI Summer RAs & 2015-2016BMGI/Larson Fellows

PG 3-4: 2015 NYC Networking Trip

PG 5: Spring 2015 Student ResearchAnalysts

PG 6: SIF’s Claremont Finance Conference

PG 7: FEI Affiliated Faculty Publications

PG 8: Recognizing FEI Seniors

PG 9: Recognizing FEI Seniors Continued;Randall Kroszner Speaks at the Ath

PG 10: Where Will FEI Students Be

Working?; Upcoming Events

TheExchangeTheExchange

THE 2014-15academic yearproved successful forthe FEI as wecontinued existingprogramming andbegan looking toexpand our reach insome directions.Regarding

continuing programming, we employed 32students during the Fall and Springsemesters, hired 8 full-time RAs last summerand we’ve hired 7 full-time RAs for thissummer, co-sponsored and participated inthe New York City Networking Trip, helpedorganize and sponsored a pitch event for theCMC Student Investment Fund and twofinance conferences, brought in RandallKroszner as an Athenaeum speaker, andcontinued to support students by providingtutors for the Bloomberg Terminal as well asExcel, Python, and Stata. On the initiativefront, we expanded programming in severalareas, including data and tutoring support,local finance-related programming, socialimpact support (co-sponsoring a trip by 17CMC students to attend a conference andtraining program regarding local micro-finance via the In-Lend organization), andparticipated in the Research Institute Fair oncampus on April 3rd (we thank Ed Leathers’15, for his excellent representation of theFEI at the event).

During the 2014-15 academic year, 11students successfully completed the FinancialEconomics Sequence, and Joshua Thomaswon the prize for Best Thesis in Financial

Economics for his thesis titled 10b5-1 Plansand Earnings Management by High-LevelExecutives, in which he showed that firmsmanipulate earning ahead of stocktransactions under these plans in order toobtain favorable pricing at transaction time.We would also like to note that one of ourFES graduating seniors, T. Connor Schlegel,was awarded the Best Thesis in Economics,for his thesis on Strategic Risk Taking inTournaments through the Lens of PGA MatchPlay. Another FES graduating senior, ElanBernstein, won the Outstanding Achievementin Quantitative Economics award. A past FEIRA and current BMGI/Michael Larson Asset

VOLUME 19, SPRING 2015

Director’s Reportby Joshua Rosett

See Director’s Report on page 2

Joshua Rosett

CMC PRESIDENTHiram E. Chodosh

RDS BOARD OF ADVISORSPeter K. Barker ’70 P’01 (Co-Chair)

JP Morgan Chase & Co. (Retired)

James B. McElwee ’74 P’12 (Co-Chair)Independent Venture Capitalist

Gary Birkenbeuel ’80 Ernst & Young

J. Baxter Brinkmann P’16 The Brinkmann Corporation

Jose Campos ’91 Deloitte & Touche LLP

Heidi Nelson Cruz ’94 Goldman Sachs & Co.

Nicholas P. Daifotis ’79 P’17 RBC Capital Markets, LLC (Retired)

Alan M. Delsman ’68 Deutsche Bank AG

Christopher Dodds P’13 P’15 The Carlyle Group

Maureen Downey ’93 Pantheon Ventures

Russell Greenberg ’79 Altus Capital Partners

Christopher D. Harris ’98 Damitz, Brooks, Nightingale, Turner, and Morrisset

Alan C. Heuberger ’96 BMGI

Stella Ho ’97 Moelis & Company

Andrew J. Kaiser P’13 Goldman Sachs Bank USA

Christine Huk Mann ’87 Goldman Sachs & Co.

I. Joseph M. Massoud ’89 Anholt Services (USA) Inc.

Susan Matteson-King ’85 Allianz Global Investors

Therese Mrozek P’15 Weston Presidio

Thomas B. Neff ’76 FibroGen, Inc.

John R. Shrewsberry ’87 Wells Fargo & Company

Robert P. Thomas ’99 The George Kaiser Family Foundation

Julius Wang P’14 P’15Samena Asia Managers

FEI DIRECTOR

Joshua Rosett

ADMINISTRATOR

Brian Dennis

ASSISTANT TO THE DIRECTORTerri L. Van Eaton

The Financial Economics Institute fosters education and research in financial economics byoffering a unique undergraduate curricular program, the Financial Economics Sequence,supporting state-of-the-art databases, and encouraging student-faculty interaction on research.

2 THE F INANCIAL ECONOMICS INST ITUTE

Management Fellow, Andrew Dodds, wonthe award for Best Senior Overall. Theawards were announced at the Robert DaySchool of Economics and Finance AwardsNight at the Athenaeum on May 4th.

Our previous report noted the Fall2014 Southern California FinanceConference organized by Professors MitchWarachka and Eric Hughson, with keynotespeaker Professor Ivo Welch of UCLA, aswell as the Student Investment Fund pitchevent including representatives of BMGIand WestRiver Capital. We followed thoseup this Spring by helping to organize theStudent Investment Funds’ ClaremontFinance Conference on February 13, 2015,co-sponsored with the Pomona College andScripps College Student Investment Funds.The conference included a luncheon at theAthenaeum with a Keynote talk by DonGould ’79 POM, President and ChiefInvestment Officer at Gould AssetManagement, panel sessions at theFreeberg Forum, a networking and cocktailreception, and dinner at the Athenaeumwith Keynote Speaker Shaw Wagener ’81,Chairman at Capital Group Internationaland CMC Trustee. The event was co-sponsored by the Robert Day School ofEconomics and Finance.

As part of the FEI Speaker Series, theInstitute brought Randall S. Kroszner toCMC as an Athenaeum speaker the eveningof February 12, 2015 (see article on page 9).Kroszner is the Norman R. BobinsProfessor of Economics at the University ofChicago’s Booth School of Business, twiceserved on the Council of Economic Advisers

to the President, and from 2006 to 2009served as a Governor of the U.S. FederalReserve System. As such, he played animportant role in the Fed’s actions tomitigate the financial crisis that began in2008. His talk at the Athenaeum focused onthe Fed’s responses to the financial crisis, aswell as initiatives to improve the stability ofthe financial sector and provide consumerprotection and disclosure for credit cardsand mortgages. The Lowe Institute ofPolitical Economy co-sponsored ProfessorKroszner’s visit to CMC.

In January, the FEI and RDS jointlysponsored the New York City NetworkingTrip, taking 14 students to see a range offirms across a variety of service types andsizes within the financial sector. A highlightwas our visit to the floor of the New YorkStock Exchange. Several studentsinterviewed with firms while on the trip,and some will be doing their summerinternships this summer with firms wevisited in January. We thank MichelleChamberlain for her excellent workorganizing and leading the trip.

During the year, we made progress onseveral initiatives. First, regarding data, wereviewed our existing data offerings (wethank Gabriel Ayala ’16 for his excellentwork compiling this review) during the yearand added two new databases from BureauVan Dijk noted in our Fall report. Wesubsequently sponsored a video conferencetraining session for our faculty and studentsprovided by a Bureau Van Dijk supportspecialist. We consider data to be a highpriority for the FEI, and over the summerwill be looking to add several additionaldatabases. We are also pursuing a strategyfor incorporation of big data into the FEI.

As noted in the Fall newsletter, we hiredAviv Caspi ’16 to provide Python tutoringand support, and he assisted in a seniorthesis analyzing text components as part of abroader analysis of project financing viacrowdfunding site Kickstarter. We are alsoin negotiations with an outside group toprovide support for development of accessto CommonCrawl, a web imaging project,for projects in finance.

Second, during the Spring semester, wehad two teams working on projects in localfinance, one team constructing indices bygeographic and industrial sectors forpublicly traded firms headquartered inCalifornia. A second team began researchon measures of deal activity in California,leveraging as one source of information oneof the new databases purchased last Fall.These will appear on our new website,slated to go online later this year. Thoughnot yet begun, we also plan a real estateanalysis component for Southern Californiareal estate segments.

Looking to next year, we anticipateworking more closely with the CMCStudent Investment Fund on severalaspects of our programming. Our tentativeplans include collaboration in bringingFEI/SIF alumni to campus for informationsessions, and SIF participation in financialliteracy training.

Finally, in closing, on behalf of myselfand the many students and faculty who havebenefitted from the FEI’s activities this year,I thank both Terri Van Eaton and BrianDennis for their excellent work at the FEI.Also, as always, I am grateful to the RobertDay School Board members and others fortheir generous contributions which makethese activities possible. ▲

Director’s Report from page 1

Congratulations to the FEI Summer 2015 Research Analysts:

AMBERISH CHITRE ’18, Economics majorQIANYUN “CAROLE” GAO ’17, Economics/Psychology dualmajorPHILLIP JAUREGUI ’17, Psychology/Economics dual majorKANISHK KAPUR ’18, Economics-Accounting major with theFinancial Economics SequenceMINGDA LIU ’17, Economics-Accounting majorCHENGWU “HARRIS” XUAN ’17, Economics majorYI “NORA” ZHANG ‘17, Economics/Mathematics dual major

Congratulations to the 2015-2016 BMGI/Michael Larson Asset Management Fellows:

RACHEL DOEHR ’16, Economics major with the Financial EconomicsSequenceBRIAN ECKHARDT ’16, BA/MA – BA degree in Economics, Master’sdegree in FinanceAMBER FALKNER ’16, BA/MA – BA degree in Economics, Master’sdegree in FinanceSEAN SAKAGUCHI, PPE/Economics-Accounting dual major with theFinancial Economics SequenceALBERT XU ’17, Economics and Philosophy double major

CLAREMONT MCKENNA COLLEGE 3

2015 New York City Networking TripBy Brian Delaney ’16 and Kaitlyn Kelleher ’17

THIS JANUARY, THE FINANCIALEconomics Institute and the Robert DaySchool of Economics and Finance sponsoredthe 12th annual New York City NetworkingTrip. In the final week of winter break, ninejuniors and five sophomores traveled toNYC to learn about the wide array ofopportunities available in the financialservices industry. The trip offered chancesfor students to connect with various alumniin both professional and casual settings.Michelle Chamberlain, Director ofEmployer Relations for the RDS, andProfessor Joshua Rosett, Director of theFEI, accompanied the students on their visit.

The group began their week themorning of January 12th with a tour of theNew York Stock Exchange. Joe Vencil ’85hosted the group on behalf of Albert Fried &Company, a specialist, institutionally centric,trade execution firm. Students received abrief tour of the Exchange’s museum andthen walked the floor in small groups. Theyeven witnessed a live broadcast of CNBC’s“Squawk Box.”

The trip to the New York StockExchange was followed by a visit to ITG(Investment Technology Group, Inc.), anelectronic broker and independent researchfirm. Bob Gasser, ITG’s President andCEO, addressed students on the importanceof investing in talented youth within ITGand the evolving functions of a research-focused brokerage firm working in anincreasingly competitive space. FollowingGasser’s remarks, students posed questionsto a panel of young professionals operatingacross the company in everything from salesto analytics.

The group then traversed West Street tovisit Goldman Sachs. Alumni working acrossmany roles delivered a well-roundedperspective on working in financial services.Christine Mann ’87 spoke to the firm’sPrivate Wealth Management business andwas joined by Andy Kaiser P’13, ChiefOperating Officer of Goldman Sachs Bank.Kaiser reflected on his various roles withinthe bank over the past 20-plus years,including his time securitizing disaster risk,and the role of a Goldman Sachs Partner.Andrew Cosentino ’11, Andrew Duckworth’12, Patricia Ingrassia ’13, and David Alvillar

’01 introduced Goldman’s Securities Divisionto the group. Max Mullen ’12 and ShreePandya ’14 overviewed the InvestmentBanking Division.

The evening offered a networkingreception hosted by Doug Peterson ’80 P ’14’15, CEO of McGraw Hill Financial. Theevent was well attended by many CMCalums living in the NYC area.

The second day kicked off with a trip toMoelis & Co., where Peter Li ’06 and JordanStein ’14 hosted the group along with SeniorVice President Griff Norquist. Studentsreceived a brief presentation expounding themajor functions of the firm. Peter and Jordanthen led a panel of their colleagues, whichtouched on the role of a boutique investmentbanking analyst.

Next, students made their way south toDeutsche Bank, where they were hosted forlunch by Alan Delsman’68, Head of CreditRisk Management for the Americas. He wasjoined by Rich Ferguson ’81, Chief RiskOfficer for the Americas, Debbie Jones’01,VP Equity Research, Steven Limandibhratha’14, Risk Analyst, and Zain Jamal ’10, CreditRisk Analyst who specializes in Real Estate.The hosts delivered a firm-wide overviewand presented various opportunities foryoung professionals within the bank. A paneldiscussion followed. The discussion provideda clear perspective of working in risk andequity research at a large global investmentbank. A strong emphasis was placed on theadvantages of working at a trulymultinational corporation that valuesworking abroad.

Following a quick stop at Wall Street’siconic bull statue, students received a tour ofBloomberg’s remarkable office space. Thestrikingly open construction allowed thegroup to intimately observe the interworkingof the information giant. After the tour,Justin Sheen’03 met the group on the topfloor, where he spoke to his plethora of rolesat Bloomberg from within one of thebuilding’s only non-glass conference rooms.

Students made their way to RockefellerPlaza to visit Lazard, where they were hostedby Cav Walters ’13, and Sam Kaplan POM’15. The visit consisted of an extended paneldiscussion that touched on the merits ofworking in boutique banking, as well as the

benefits of a liberal arts education for aninvestment banking analyst.

Tuesday concluded with a Dine Aroundprogram. Small groups or individualstudents connected over dinner with alumniat restaurants scattered across Manhattan.The nightly activities received rave reviewswhen students returned to the hotel. Theunique opportunity to spend an eveningwith a single or small group of alumni leftstudents knowing that they will return fromthe trip with at least one strong point offuture contact.

Greenhill & Co. started off Wednesdaywith a presentation laying out their targetedservices and an outline of the broaderboutique investment banking landscape. Apanel of current analysts followed, wherestudents learned about the various benefits ofa generalist analyst program.

Next, Kevin Collins, Client PortfolioManager at Alger, delivered a presentationon the strategy of a research-driven assetmanager, as well as explained the intricaciesof the firm’s managerial structure. Mr.Collins also gave a comprehensive overviewof the asset management space.

Students then visited J.P. Morgan, wherea panel discussion overviewed the variousfunctions of the financial services giant. DanaStaley ’12 gave insight into working in theinvestment banking division, while MerrielFoster ’14, and Managing Directors SusanAdamsen ’81 and Leslie Lassiter SCR ’79introduced the private bank. The panel spoketo the everyday duties of their positions, aswell as the benefits of working for a well-integrated investment bank that performs awide range of functions.

Wednesday’s last firm visit was Millstein& Co., a boutique investment bank with aunique focus on restructuring. AliAbramovitz ’12 and Managing DirectorBradley Hayes gave group presentationsbefore the students broke into smaller groupsto speak with both junior and senior bankers.

Wednesday concluded with an alumninetworking reception at the Princeton Club.The packed event allowed students toacquaint themselves with many alumni fromthe New York City area.

See NYC Networking Trip on page 4


The final day of the trip began with anearly morning visit to Morgan Stanley,hosted by Ben Kraus ’11. Students learnedabout the firm’s securities division and askedquestions about the roles andresponsibilities of a trader working at abulge bracket bank.

Next, the group visited BNP Paribaswhere students were treated to a presentationby Chris Innes ’92 and Justin Eskind ’11.Justin provided students with an overview ofhis day-to-day roles as a trader while Mr.Innes commented on the current equitytrading environment and fielded questionsabout his unique path in finance.

In the afternoon, students had theopportunity to meet with Ivan Zinn ’96, thefounding partner and Chief InvestmentOfficer at Atalaya Capital Management. Mr.Zinn spoke to his experience starting hisown firm, discussed the value of investing incredit opportunities, and offered adviceabout a career in both private equity and inthe financial services industry.

Finally, the students visited CreditSuisse where Meg Nunnally ’03 led a paneldiscussion with representatives from thefirm’s investment banking, securities,research, and private banking divisions.Students learned about the various careeropportunities within the firm and garneredvaluable insight into navigating therecruiting process.

The 2015 New York Networking Tripwas a great success. Many of the studentsspent their final day in the city interviewingwith some of the 14 firms visited earlier.The scads of professional experience,coupled with the personal contactsdeveloped during the firm visits and eveningsocial events, will absolutely benefit studentsin future endeavors.

A great deal of thanks must be extendedto the Robert Day School of Economics andFinance, the Financial Economics Institute,the CMC Alumni and Parent RelationsOffice, the CMC Alumni Association, theRDS Advisory Board, and the many alumnihosts at the various firms for their generouscontributions that made this trip possible. ▲

NYC Networking Trip from page 3


GABRIEL AYALA ’16, Building Regional and Industry Segment EquityIndices for California, with Professor Joshua Rosett, and he was also theExcel tutor

AVIV CASPI ’16, Building Regional and Industry Segment Equity Indicesfor California, with Professor Joshua Rosett, and he was also thePython tutor and programmer

AMBERISH CHITRE ’18, Understanding the Nature of DaubertChallenges, with Professor Eric Helland

JAE SUNG “JASEN” CHOI ’18, Relevant vs. Reliable InformationDisclosure and Investor Reaction, with Professor Ananda Ganguly

JESSE CRABTREE ’16, Physiological responses to movie trailers as apredictor of sales: An economic model for movie revenues, with ProfessorPaul Zak, Claremont Graduate University

RACHEL DOEHR ’16, Investigating the Role of Ideology in Appellate CourtDecisions, with Professors Eric Helland and Cameron Shelton

MATTHIEU HAFEMEISTER ’17, Credit Default Swap Trading andInternal Capital Markets, with Professor George Batta

ALEX HWUNG ’16, Understanding the Nature of Daubert Challenges,with Professor Eric Helland

AMY INGRAM ’17, Credit Default Swap Trading and Internal CapitalMarkets, with Professor George Batta

MICHAEL IRVINE ’16, Understanding the Nature of Daubert Challenges,with Professor Eric Helland

CHRISTOPHER JACKSON ’17, Physiological responses to movie trailers as apredictor of sales: An economic model for movie revenues, with ProfessorPaul Zak, Claremont Graduate University

ANANT JAITHA ’17, Relevant vs. Reliable Information Disclosure andInvestor Reaction, with Professor Ananda Ganguly

NINA KAMATH ’16, FEI website RA

CHRISTIAN KELLY ’18, Understanding the Nature of Daubert Challenges,with Professor Eric Helland

MIN JUN “MJ” KIM ’15, Examining the Effects of Football ClubOwnership on Share Prices: Evidence from China and Korea, withProfessor Richard Burdekin

BENJAMIN LAWSON ’15, Market Efficiency and the Dissemination ofPublic Information, with Professors Mitch Warachka and MarcWeidenmier

EDWARD LEATHERS ’15, Congressional Insider Trading: Should We BeConcerned?, with Professor Eric Hughson

IRIS LIU ’16, Understanding the Nature of Daubert Challenges, withProfessor Eric Helland

ANDREW NAM ’15, Stata tutor

HANNAH OH ’16, FEI website RA

CAMERON WHITING ’15, Building Regional and Industry SegmentEquity Indices for California, with Professor Joshua Rosett and he wasalso the Bloomberg tutor

ALBERT XU ’16, The Term Structure of Stock Required Returns, withProfessor Gary Smith, Pomona College

SOYEON “NIKKI” YEA ’15, Financial Flows and Payments Adjustmentin a Mixed Exchange-Rate Regime, with Professor Sven Arndt

Financial Economics Institute Spring 2015 Student Research AnalystsDuring the Spring 2015 semester, twenty-three students were hired to work for the FEI. The following is a list of thestudents, their roles at the Institute, or the topics of their research projects and their faculty advisors:

Back row, from left: Alex Hwung ’16, Matthieu Hafemeister ’17, Anant Jaitha ’17, Amberish Chitre ’18, Gabriel Ayala ’16, and MichaelIrvine ’16. Front row, from left: Iris Liu ’16, Ed Leathers ’15, Cameron Whiting ’15, Aviv Caspi ’16, Jesse Crabtree ’16, and Amy Ingram ’17.


CLAREMONT MCKENNA COLLEGE,Scripps College, and Pomona Collegecollectively hosted the Seventh AnnualClaremont Finance Conference on February13, 2015. The conference was organized bystrategic members of the Student InvestmentFunds of these colleges. The CFC was co-sponsored by CMC’s Robert Day School ofEconomics and Finance, the CMC AlumniAssociation, the CMC Development Office,and the Financial Economics Institute.

This year, we selected “Investing atMarket Highs” as the conference theme andinvited a host of leading alumni and industryprofessionals to provide their perspectives onthe industry. The theme this year wasdesigned to be narrow enough to provide aspecific focus for discussion, but broadenough to allow alumni from many differentsectors of the investing world to participate.Alumni representing venture capital, privateequity, portfolio management, trading, andhedge funds all participated in the conferenceand lent their perspective on current marketconditions to a diverse array of students fromacross the Claremont Colleges.

The conference began with lunch inthe Marian Miner Cook Athenaeum atCMC. Don Gould (POM ’79), Presidentand Chief Investment Officer at GouldAsset Management, spoke about efficientmarkets and his personal approach toinvesting. He also spoke about theemotional side of working with his clientsand how to help them navigate throughboth bull and bear markets.

Attendees then transitioned to CMC’sFreeberg Forum at the Kravis Center for two

panel discussions. The first panelfocused on Equity Investing undertoday’s frothy market conditions.Panelists represented a variety offirms and levels of experience: TonyBrenner (CMC P’17), ManagingPartner at Pivot Point Capital; ToddBarker (CMC ’01), ManagingDirector at Citadel InvestmentPartners; Brad Heaton (CMC ’09 M’13), Managing Partner at HeatonCapital Management; and BenHerrick (CMC ’04), SeniorInvestment Analyst at del Rey Global.The panel was moderated by CMCProfessor Eric Hughson.

A short networking receptionwas held before the second panel,which focused on AlternativeInvesting. Panelists included: MarkRobles (CMC ’78), Principal at AltaPacific Wealth Management; GavinTeo (CMC ’03), Principal at ComcastVentures; and Mike Widmann (CMC’10), Senior Associate at Silver LakePartners. The talk was moderated byCMC Professor Murat Binay.

Conference attendees thentransitioned back to the Athenaeumfor a networking and cocktail reception.Following the reception, dinner was servedand Shaw Wagener (CMC ’81), Chairman atCapital Group International and CMCTrustee, delivered a keynote presentationentitled, “Longer Term Perspectives ofMarket Tops and Bottoms Providing Contextto Emerging Markets Today.” Following thetalk, Wagener answered questions from the

audience and met attendees after theconclusion of the conference.

Connor Stastny ’17, an analyst in theCMC Student Investment Fund, wasespecially impressed by Keynote SpeakerShaw Wagener. Stastny commented that itwas “fantastic getting to speak with Mr.Wagener and learn about his years ofleadership in international investing. Weshare a strong passion for investing and theopportunity to meet an industry leader of hisstature was amazing.” Connor also statedthat he thought both conference cocktailreceptions provided the students and alumnigreat opportunities to network.

This year’s conference had a greatturnout, and conference organizers received alot of positive feedback. Conferenceorganizers said they have high hopes that, inthe future, the conference will include moreparticipation from every college in theClaremont Consortium. The conference hasgrown tremendously over the past seven yearsand organizers are determined to continueimproving the conference every year. ▲

Claremont Finance ConferenceBy Philip Crawford CMC ’15 and SIF Chief Executive Officer (2014-2015)

Don Gould ’79 Pomona

Shaw Wagener ’81 CMC


FEI Affiliated Faculty Research Selected 2014-2015 publications by faculty members affiliated with the FEI:

u Evolving Patterns in Global Trade and Finance, Sven W.Arndt, World Scientific Studies in International Economies 39,World Scientific Publishing Co. Pte. Ltd., Singapore, 2015

u “Transfer Spending in the English Premier League: The Haves andthe Have Nots,” Richard C.K. Burdekin with Michael Franklin,National Institute Economic Review, Vol. 232 (May 2015), in press

u “Assessing the Impact of the Chinese Stimulus Package at Homeand Abroad: A Damp Squib?,” Richard C.K. Burdekin with MarcD. Weidenmier, China Economic Review, Vol. 33 (April 2015), pp.137-162

u “Tiananmen Square 1989: The View from Financial Markets,”Richard C.K. Burdekin with Li Xinzhu, Applied Economics Letters,Vol.: No. 2 (January 2015), pp. 141-147

u “Bank Lending Margins in China and the Effects of the June 2012Liberalization,” Richard C.K. Burdekin with Ran Tao, Journal ofInternational Commerce, Economics and Policy, Vol. 5, No. 2 (2014), 19pages [doi:10.1142/S1793993314500033]

u “Everything’s Bigger in Texas Except the Medmal Settlements,”Eric Helland with Tom Baker and Jon Klick, Connecticut InsuranceLaw Journal, forthcoming

u “Medical Malpractice Reform: Noneconomic Damages CapsReduced Payments Fifteen Percent, with Varied Effects BySpecialty,” Eric Helland with Anupam B. Jena and Seth Seabury,Health Affairs, October 2014

u “Stock Ownership and Patterns of Recusal in Federal Courts,” EricHelland with James Anderson, Georgetown University Law Review,forthcoming

u “Bias in the Legal Profession: Self Assessed versus StatisticalMeasures of Discrimination,” Eric Helland with Heather Antecoland Deborah Cobb-Clark, Journal of Legal Studies, 43(2): 323-357,2014

u “Tort Reform and Physician Labor Supply: A Review of theEvidence,” Eric Helland with Seth Seabury, International Review ofLaw and Economics, forthcoming

u “Why expertise is important for the detection of abnormalperformance: the hot hand strikes back,” Eric Hughson with ChrisLeach and David Frame, Journal of Accounting, Auditing and Finance,forthcoming

u “Are Public Equity Markets Declining in Importance?” JoshuaRosett and Richard Smith, Journal of Applied Finance, (2014) Vol.24, No. 1:6-13

u “Disclosure-derived Financial Statement Adjustments in EquityValuation,” Joshua Rosett with George Batta and AnandaGanguly, Review of Pacific Basin Financial Markets and Policies, Vol.17, Issue 2

u “Risk Taking in Competitive Settings: Evidence from Match PlayGolf Tournaments,” Janet Kiholm Smith with Serkan Ozbeklik,Journal of Corporate Finance, forthcoming

u Standard Deviations: Flowed Assumptions, Tortured Data, andOther Ways to Lie with Statistics, Gary Smith,Overlook/Duckworth, New York, 2014

u “Why Are Some Home Values Resistant and Others Resilient?,”Gary Smith, International Real Estate Review, 17 (2), 2014, 223-240

u “Great Companies: Looking for Success Secrets in All the WrongPlaces,” Gary Smith with Gabrielle Baum, Journal of Investing,forthcoming

u “Frog in the Pan: Continuous Information and Momentum,”Mitch Warachka with Z. Da and U. Gurun, Review of FinancialStudies 27, 2171-2218, summary is to be published in Finance andAccounting Memos (FAMe)

u “Are Hard Pegs Ever Credible in Emerging Markets? Lessons fromthe Classical Gold Standard,” Marc Weidenmier with KrisMitchener, Journal of Economic History, forthcoming

u “Measuring Power and the Rise of East Asia,” Thomas Willettwith Eric Chiu in Benjamin J. Cohen and Chiu, eds., Power in aChanging World Economy: Lessons from East Asia, Routledge,2014

u “Fixed Exchange Rates and Financial Markets as Sources ofMacroeconomic Disciplines,” Thomas Willett with Eric Chiu andStefanie Walter in Thomas Oatley, Ed., Handbook ofInternational Monetary Relations, Edward Elgar, 2014

u “The Political Economy of the Euro Crisis: Cognitive Biases,Faulty Mental Models, and Time Inconsistence,” Thomas Willettwith Nancy Srisorn, Journal of Economics and Business, forthcoming

u “Egypt’s Exchange Rate Policies After the Float,” Thomas Willettwith Ali Massoud, International Journal of Social Science Studies, 2014

u “News and the Behavior in the Korean Stock Market during theGlobal Financial Crisis,” Thomas Willett with Yoonmin Kim,Korea and the World Economy, December 2014, pp. 395-419

u “How Common Are Capital Flow Surges? How They AreMeasured Matters A Lot,” Thomas Willett with M. Crystalin, etal., Open Economies Review, forthcoming

u “Are Credit Ratings Relevant in China’s Corporate Bond Market?,”Fan Yu with Raghav Dhawan, Chinese Economy, 48(3), pp. 1-16,2015

u “The Neural Inhibition of Learning Increases Asset MarketBubbles: Experimental Evidence,” Paul Zak with L. Efremidze, G.Sarraf, and G. Miotto, Journal of Behavioral Finance, in press

u “Neuromanagement: Using Neuroscience to Build HighPerformance Organizations,” Paul Zak, P. Balthazard and D.Waldman, Eds., Organizational Neuroscience, EmeraldPublishers, forthcoming

u “Why Trust Matters,” Paul Zak, Ivey Business Journal, in press


Congratulations Class of 2015!

THE FINANCIAL ECONOMICSSequence is part of the Robert Day School ofEconomics and Finance. The curriculum ofthe Sequence is designed for studentsinterested in pursuing careers in the financialsector and/or graduate education ineconomics, finance, and related fields.

The Sequence has a rigorousquantitative focus and is designed tocomplement majors in economics,economics-accounting, and mathematics, aswell as dual majors having an economicscomponent. In addition, the Sequence iscomplementary to the coursework requiredfor the undergraduate Robert Day ScholarsProgram, and prepares students for theMaster’s Program in Finance of the RobertDay School. Under the auspices of theFinancial Economics Institute (FEI), studentscomplete the Sequence, which is noted onthe transcript, thereby attesting to their solidunderstanding of the discipline.

We had eleven FES seniors whograduated during the 2014-2015 academicyear. Four of these seniors gave their FESoral defense presentations at the end of theFall semester and seven at the end of theSpring semester. In order to receive theFinancial Economics Sequence notation ontheir transcript, students must complete amajor research project in the area of financialeconomics, the project may be the student’ssenior thesis, and make an oral presentation.

We would like to announce that JoshuaThomas wrote the Best Thesis in FinancialEconomics for 2014-2015! Congratulations!

The following is a list of the studentswho made their presentations this semesteralong with the titles of their senior thesesand the Abstracts of their theses:

MOHAMAD ABDUL-RAHIM, M&A in M&E:Acquirer Announcement Effects of Mergers &Acquisitions in the Media and EntertainmentIndustry“This paper uses event study methodology topresent evidence that acquirer announcementeffects for mergers and acquisitions (M&A)in the American Media and Entertainment(M&E) industry are insignificant. In order toreach this conclusion, this paper bothexamines existing literature on the topic andmanipulates available data on public

companies in the M&E industry. It also usesthis data to investigate the extent to whichdifferent factors influence the acquirerannouncement effects. These factors include:the type of financing used for the deal, recentmega-merger failures in the M&E industry,M&A strategy (expansion vs. diversification),as well as target size, country, and sub-industry. The results show that none of thesefactors have a significant impact onannouncement effects.”

PITRA HARUN, Founding-Family Ownershipand Firm Performance: Evidence fromIndonesia“In my study, I examine the relationshipbetween founding family ownership and firmperformance. Using publicly listedcompanies in Indonesia, I observe familiesare much more prevalent than in the US; inmy sample, families are present in over 60%of Indonesian listed companies and familiesown an average outstanding equity of50.4%. Contrary to previous literatures, Ipresent new evidence to show foundingfamily ownership and control is a moreefficient form of ownership structure onlywhen the family is a majority-shareholder inthe company. Additional investigation showsthat founding family ownership has a U-shaped quadratic relationship with firmperformance, indicating that an increase infamily ownership is initially associated withworsening firm performances, but is thenassociated with improving firmperformances after passing a certain level ofequity ownership.”

VALERIE HO, An Analysis of Water Rates andHome Prices: A Case Study“The issue of the rising Claremont waterrates has been a heated topic of debate overthe last couple of years. This study is part ofa larger body of literature that seeks todetermine the extent to which a location-specific amenity or dis-amenity is capitalizedinto housing values, and specifically aims toexamine the relationship between water ratesand home prices in Claremont. To do this, ituses houses in La Verne, where water rateshave not been rising as rapidly, as a controlgroup. Specifically, the regression modellooks at whether the differences in the water

bills between Claremont and La Verne areassociated with the differences in the houseprices between Claremont and La Verne. Indoing so, it also provides an estimate of theprice discount faced by houses in Claremontdue to the water rate.”

CHRISTIAN MKPADO, The Effects of El Ninoand La Nina Weather Events on Corn FuturesPrices(Part of Introduction): “The followingpaper will analyze the effects of the ElNino and La Nina weather patterns oncorn futures prices. The Effects of El Ninoand La Nina Weather Events on Corn FuturesPrices, stemmed from my interest inagricultural economics, and how thechanging environment will affect mankind’sability to produce the necessary food tosurvive. Recently, California has been hitwith one of the longest and most severedroughts in the state’s recent history. Withmandatory water restriction now in effect, Iwas curious to understand how thecountry’s food supply would be affected byadverse farming conditions.”

BARUN ROYCHOWDHURY, Do InternalFunds Play an Important Role in FinancingDecisions for Constrained Firms?“In this paper, I discuss the importance ofinternal funds for corporate investmentamong financially constrained firms. I use thepaper ‘Financing Constraints and CorporateInvestments’ by Fazzari, Hubbard andPetersen as a base for my framework. I focuson a specific paper refuting their findings andtheir response in order to fully understandthe benefits and costs of the framework. Ithen apply the original framework to a recentsample that covers the Great Recession tosee the results of the initial paper are stillvalid today and if the recent recession andelongated recovery had an even more adverseeffect on financially constrained firms thanwas previously noted.”

JOSHUA THOMAS, 10b5-1 Plans andEarnings Management by High-LevelExecutives “Using historical firm financial and insider

See Class of 2015 on page 9


trading information, this paper examineswhether high-level insiders manipulateearnings ahead of their own 10b5-1 equitytransactions. The empirical evidence suggeststhat high-level executives appear tomanipulate earnings through real activitiessuch as abnormal discretionary expendituresand abnormal cash flows from operations toinfluence equity prices ahead of their owntransactions under Rule 10b5-1. Evidencealso suggests that executives appear to be

unlikely to engage in earnings managementthrough highly scrutinized means such asaccruals. An interpretation of these results isthat high-level executives may be using10b5-1 plans as an offensive tool to tradewith the knowledge of inside information,which appears to be in direct opposition tothe defensive mechanism that 10b5-1 plansare intended to represent.”

DAVID TSE, Conditional Systematic Risk ofEquity Real Estate Investment TrustsThis paper examines whether REIT betas

have a consistent relationship with marketperformance. I find a statistically significantrelationship between returns to the marketand the level of systematic risk for a givenREIT. During periods where monthly S&Preturns outstrip those of the 30-day tbill,REIT betas are lower. Of the 11 largestREITs, 9 have this behavior. When using afama-french model, however, thisrelationship is no longer statisticallysignificant, seeming to indicate that REITbetas are affected by small-stock or value-stock effects. ▲

Class of 2015 from page 8

AS PART OF THE Financial Economics InstituteSpeaker Series, ProfessorRandall S. Kroszner spoke at theAthenaeum on February 12,2015 about the financial crisisthat began in 2008 and itsaftermath. Kroszner is theNorman R. Bobins Professor ofEconomics at the University ofChicago’s Booth School ofBusiness. He was an

undergraduate at Brown and received his Ph.D. from Harvard.From 2001 to 2003, Professor Kroszner was a member of the U.S.President’s Council of Economic Advisers (CEA), where he wasinvolved in issues ranging from sovereign debt restructuring toterrorism risk insurance to IMF reform. From 2006 to 2009, heserved as a Governor of the U.S. Federal Reserve System. Hechaired the Fed’s committee on Supervision and Regulation andthe committee on Consumer and Community Affairs. In thesecapacities, he took a leading role in developing responses to thefinancial crisis and in undertaking new initiatives to improveconsumer protection and disclosure for credit cards and mortgages.He represented the Fed on the Financial Stability Board and theBasel Committee on Banking Supervision, and chaired the OECDworking party of deputy central bank governors and deputy financeministers on international macro policy.

Professor Kroszner has more than 100 publications. His recentbook co-authored with Nobel laureate Robert J. Shiller, the ArthurM. Okun Professor of Economics at Yale University, Reforming

U.S. Financial Markets: Reflections Before and Beyond Dodd-Frank appeared on the Washington Post’s “Book World” politicalbestsellers list. Kroszner’s paper on corporate ownership won theBrattle Prize for best corporate finance paper in the Journal ofFinance. He has served as Editor of the Journal of Law and Economicsand has been on the editorial boards of numerous academic andpolicy journals. His research interests include financial crises,monetary policy, regulation of financial institutions, riskmanagement, debt restructuring, and corporate governance.

Professor Kroszner is a much sought-after commentator in theinternational media. He provides advice on economic, monetary,financial, and regulatory outlook and strategy for financialinstitutions, government organizations, and central banksthroughout the world. He is on the World Economic Forum’sGlobal Agenda Council on the Global Financial System and isinvolved with Gates Foundation initiatives on promoting access tofinancial services for the poor in emerging market countries.

Professor Kroszner’s presentation provided both a clearsummary of the workings of the banking and housing mortgagesectors in the U.S. and global economies, and an interestinganalysis of what went wrong as the interconnections betweeninstitutions and lack of transparency regarding risks associated withinstruments such as mortgage-backed derivative securitiescombined to produce the downward spiral in late 2008. He alsodiscussed several strategies for reform outlined in the book notedabove, but warned that we are far from understanding the forcesthat caused the crisis and implementing policies that ensurestability going forward.

This Athenaeum talk was co-sponsored by the Lowe Instituteof Political Economy and the Marian Miner Cook Athenaeum. ▲

Lessons from the Financial Crisis of 2008: Are We Safer Today?By Randall S. Kroszner

Randall S. Kroszner


Where Will FEI Students Be Working?

CONGRATULATIONS TO THE FOLLOWING SENIORS AND JUNIORS COMPLETING THE FINANCIAL ECONOMICSSequence who have notified the FEI that they have secured a full-time job. This list identifies the students’ major(s) and their place of employment.

Graduating Financial Economics SequenceSeniors:

ELAN BERNSTEIN, Economics/Mathematics, LEK Consulting (SanFrancisco, CA)

BRADEN CROCKETT, Economics, Matthews Retail Group(Manhattan Beach, CA)

PITRA HARUN, Economics, Bain & Company (Jakarta, Indonesia)

CHUN YIN “BORIS” LO, Economics, Goldman Sachs AssetManagement (Hong Kong, People’s Republic of China)

CHRISTIAN MKPADO, Economics, The Boston Consulting Group(Los Angeles, CA)

T. CONNOR SCHLEGEL, Economics, Gran Ciudad, Black CreekCapital (Mexico City, Mexico)

JOSHUA THOMAS, Economics, Optiver (Chicago, IL)

DAVID TSE, Economics-Accounting, Goldman Sachs (San Francisco, CA)

Financial Economics Sequence Juniors – SummerPositions:

VICTOR CHAN, History, Bank of America Merrill Lynch (CenturyCity, CA)

CAROLINE COUNTS, Economics-Accounting, Ernst and Young (SanFrancisco, CA)

RACHEL DOEHR, Economics, Goldman Sachs (New York, NY)

JAMES INGRAM, Economics, Dimensional Fund Advisors (SantaMonica, CA)

GAVIN MACKINLAY, Economics-Accounting, Tableu Software(Seattle, WA)

SEAN SAKAGUCHI, Philosophy, Politics & Economics/Economics-Accounting, Millstein & Co. (New York, NY)

ANDREW SOVA, Economics, Tremblay Financial (Santa Barbara, CA)

GABRIEL SUNGA, Economics/Mathematics, JMP Securities (SanFrancisco, CA)

VISIT OUR WEBSITE AT: http://www.claremontmckenna.edu/fei/The Exchange newsletter is published by the Financial Economics Institute at Claremont McKenna College.

Bauer Center, Room 321500 East Ninth Street

Claremont, CA 91711-6400Phone: (909) 607-0042 Fax: (909) 607-0088

E-mail: [email protected]: http://www.claremontmckenna.edu/fei/

3rd Annual Southern California FinanceConference

SEPTEMBER 25-26, 2015By Invitation Only

New York City Networking Trip

JANUARY 10–15, 2016CMC students will visit prestigious firms in NYC togain exposure to various job opportunities in thefinancial markets and to establish relationships withCMC alumni working at these companies.Applications for the trip will be available in BauerCenter 321 in September, 2015.

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