Director's Message Postsfrom Exchange Newsletters
Director’s Report – Fall 2018
Fall 2018 was a good semester for the FEI. From all evidence, we see continued strong interest in all our programming, and we have several interesting events lined up for this year.
Over the Summer, we had five students doing internships full-time in the FEI Lab. Apart from one student who was stung by a bee on the way to the Lab on the first day of work, it went very well. Students worked on project topics including executive compensation, commodity pricing across the business cycle, the global financial effects of the 1962 Cuban missile crisis, and measuring systemic financial risk using data from the Great Depression.
At the start of the Fall Semester, the FEI video was finished and appeared on the front page of the CMC main website, where it remained for most of the semester. Though it was finally replaced with other videos late in the semester, it remains available on the FEI website. If you have not had a chance to view the video, we hope you will do so, as we think it presents a good summary of the value of the FEI to our students and the broader CMC community.
In the first week of classes, we had a table at the activities fair, and a large number of first year students stopped by to find out about the FEI. The following week, over 40 students, mostly first years, showed up for our annual information session. We then received a record high number of applications in recent years for RA positions. Overall, we received 68 applications, including 15 returning students and 6 BMGI Fellows. Out of this pool, we hired 22 for the semester, and with a promise to one additional student to start in the Spring.
By another measure, students pursuing degrees in finance continued at a good clip. In the Fall semester, 12 FES and BAMA students defended Senior Theses, and we expect roughly 13 more to do so at the end of the Spring semester. Once again, we expect close to 10% of the graduating class to get a degree with a finance component.
The Fall meeting of the FEI Associates featured an excellent presentation by the Student Investment Fund (SIF) leadership, and their executive team has pushed hard on improving the internal operations of the fund. This year, fund members interviewed every student applying to the fund who showed considerable effort in the application process, irrespective of their background in finance, and they provided feedback sessions for all applicants not accepted into the fund. The SIF also worked to improve the effectiveness of the training for the new fund members, took significant steps to increase diversity, and instituted new mechanisms to enhance the cohesiveness and professional culture of the fund. It was observed at the meeting that they had set a very high bar for future years.
We continue to work closely with the Student Investment Fund. We are currently working with the fund on an initiative in SRI/ESG. We thank Advisory Board member Maureen Downey for her help with this, and for her time and expertise shared with students interested in the topic. We also are providing support, such as sponsoring coffee chats, for the SIF efforts to broaden diversity and do other forms of outreach to the broader community.
During the Fall the FEI worked with the Soll Center and Robert Day Scholars program to plan the January 2019 New York City Networking Trek. Ultimately 18 students were chosen to attend the trip from January 13-17. The next newsletter will include a write-up of the trip by two of the students who participated.
Also during the Fall, we started planning for Spring semester events, including the Student Investment Fund Finance Conference and the BMGI Pitch event. The Conference was scheduled for February 15, and featured Professor Bradford Cornell as the keynote speaker. The next newsletter will include an article about the Conference. The BMGI Pitch event is now scheduled for Thursday, April 4. During the Spring semester we will also jointly sponsor (with the Center for Innovation and Entrepreneurship and the Lowe Institute of Political Economy) an Athenaeum talk by NYU Finance Professor David Yermack, scheduled for March 28.
Finally, we are very pleased to announce that William Li ’21 and Seth Taylor-Brill ’20 are the first Terri Van Eaton Fellows. As noted in our previous newsletters, the Terri Van Eaton Fellowships were established to honor Terri Van Eaton for her long and storied work at the FEI, and was funded as part of our endowment drive last year. The students are chosen based on their academic records, the quality of their work as Research Assistants in the FEI Lab, and contribution to the spirit of collegiality as a member of the FEI community. William is working with Professor Lincoln, and Seth is working with Professor Gillen.
At the start of the Spring semester, we had 23 RA’s and students working in the Lab, and we are looking forward to another busy and productive semester.
Director’s Report – Spring 2018
THOUGH THE 2017-18 academic year saw the continuation of the FEI’s main programs, much of our focus this year was on reviewing the FEI’s mission and enhancing resources that fall within our sphere. We highlighted our successful endowment fund drive in the Fall 2017 Newsletter, noting that the drive exceeded its goal and raised $560,488, including $100,090 for the Terri Van Eaton fund. This was matched with a gift from BMGI. Once again, thank you to all of those who gave so generously. But in addition to raising additional funds, we re-examined our mission statement and expanded our resource offerings along lines we believe will best benefit our constituents.
First, over the course of the year, the Strategy Committee of the FEI Advisory Board reviewed the mission statement of the FEI. The statements had not changed since the creation of the Institute in 2004, but the founding of the Robert Day School in the intervening time period and changes in the broader environment in which we operate dictated that our focus needed to change. As examples, first the creation of the BA/MA program in finance impacted the Financial Economics Sequence, the networking trip, and many other aspects of the FEI. Second, the change in timing of the job market for both interns and post-graduation necessitated adjustments in the nature of the New York City Networking Trip. Third, the maturation of the Student Investment Fund and the value of the holdings presented the opportunity to create the FEI Associates group with joint responsibilities to the SIF and the FEI. Fourth, the enormous advances in data availability and computing power over the past 15 years put great pressure on our data analysis environment at the FEI.
In response to these factors and others, the Strategy Committee of the FEI Advisory Board endorsed, and ultimately the full Advisory Board approved, a new mission statement (see About page) reflecting what we believe are a good set of guiding principles for the FEI going forward.
In recognition of these principles, we are in the process of reviewing our main activities with an eye to directing resources to where there will be the largest return for our constituents. Though we intend to continue working with the Strategy Committee over the next couple of years to review all aspects of the FEIs programming, we are already working through some of these areas.
First, as noted in a previous report, we extensively reviewed our database offerings over the past year. The number and potential research value of databases has expanded dramatically during the past decade, and we believe it is important to provide access to the highest valued among these for both students and faculty. In part due to the cost, we have sought to find partners to purchase databases where possible, including other institutes, the Library, and the Robert Day School, and the College. Over the past year, primarily through such collaborations, we have added components of the Wind database on economic series in China, both the Compustat Gobal and Point in Time databases (jointly purchased with the Library), the Loan Connector add-on to the Library’s Thompson Financial Eikon subscription, and the PitchBook database (jointly purchased with the Center for Entrepreneurship and Innovation). We will continue to review and purchase access to data sources we believe serve the mission of the FEI.
Second, over the past year, we have expanded our computing resources with both new hardware and additional software. Our new computers in the FEI Lab are high end and geared for software packages such as Stata and the finance-related modules of Matlab. Currently, we are in the process of adding a server with much larger computing capacity, approximately 10 times the memory, CPU power, and storage of the machines we can typically afford to put in the Lab. The server will allow multiple users to analyze much larger databases than otherwise would be possible. This is a joint purchase with the Lowe Institute, and the return on investment to both institutes is very large.
Third, we are working with the Robert Day Scholars program, the Soll Center, and the Student Investment Fund to enhance our training and networking offerings for students. The continual shift of the job market to earlier timing within the college student’s career has necessitated an adjustment in our target audience for the NYC Networking trip towards Sophomores, and we are working with the RD Scholars program to add space for networking trips to other destinations, as well as finance training for students associated with the FEI, the FES, and the SIF. Similarly, we continue to work with the SIF to provide training to students interested in finance. The SIF has proposed that for the 2018-19 academic year, they will run a financial analysis training session and follow on with a case competition managed by the SIF and sponsored by the FEI. We are very excited by this development.
We also note our ongoing activities. For Spring 2018, we once again had a great trip to New York for the Networking trip (see article in this Newsletter), again hosted a very successful fourth annual BMGI Pitch event, sponsored the Student Investment Fund Finance Conference, sponsored an Athenaeum talk by Greg Mankiw, had 26 student RAs working in the FEI Lab, collaborated with BMGI to choose 8 new BMGI/Michael Larson Asset Management Fellows for 2018-19, and hired 5 students to work as RAs for Summer 2018.
Finally, I want to take a moment to thank two people. First, Nancy Faust has done a great job in her first year as Administrative Assistant to the Directors. She quickly learned and very well handled the myriad day-to-day activities as well as our many larger discrete annual events. She had big shoes to fill following on from Terri Van Eaton, and has so successfully done so. Finally, it is with a bit of sadness that I note the departure of Colleen Bartlett, who is leaving CMC to take another job. Many of you know she was so instrumental in our successful fund-raising drive over the past year. Colleen collaborated so well with the Advancement Committee of the FEI Advisory Board, pushed so hard to be sure we created a great plan, contacted so many people, and doggedly followed up to get us across the finish line. I doubt we could have accomplished what we did without her. I thank her and wish her all best luck in her new post.
Director’s Report – Fall 2017
WE HELD THE release date of the Fall 2017 FEI Newsletter until Winter 2018, but with the good reason that we wanted to wait for the end of year totals on our endowment fund drive. During the 2016-17 academic year, the FEI Board of Advisors approved a goal of raising half a million dollars by the end of 2017, including $100,000 for the Terri Van Eaton Fund. These contributions would then be matched by BMGI funds set aside for this purpose. Securing funding to support many of our essential but costly mission-driven objectives has long been a necessary step for the FEI, and the Board took formal steps in this direction last year with the appointment of an Advancement Committee and formally setting the target for 2017. I am delighted to report that we reached and exceeded our goal! To date, we have new cash on hand and commitments for $560,488 towards the FEI endowment, including $100,090 for the Terri Van Eaton fund, plus the match from BMGI.
I am so grateful both to the people who worked so hard to make this happen, and to the many people who gave generously to support the FEI. In particular, several people deserve recognition for their time and energy raising funds. The FEI Advisory Board created an Advancement Committee composed of Alan Heuberger ’96, Susan Matteson King ’85 P’18, and Robert Thomas ’99. These three people contacted so many of our constituents and really drove the process. Kaitlyn Plummer from the CMC Advancement team was instrumental in providing the information necessary to make this all happen. I owe a huge thank you to Colleen Bartlett, AVP of Advancement, for her continuous support of all aspects of the drive. None of this could have happened without the concerted efforts of all of these people.
So many people gave to our endowment over this period. Within this newsletter we provide an honor roll of those who made contributions. It is due to your generosity that we reached both goals. These are remarkable achievements for such a short period of time. I thank you for your support. More importantly, I thank you on behalf of so many current and future CMCers who will benefit from your contributions. The FEI provides great opportunities for our students, and these new funds will allow us to do even more. Finally, special thanks are due to BMGI for contributing the $500,000 match to make the total enhancement of our endowment over a million dollars.
Our mission calls for support of research, oversight of the Financial Economics Sequence, and many co-curricular finance-related activities such as the New York City Networking Trip, Athenaeum talks, and significant involvement with the Student Investment Fund, including contributions to resources and oversight. All of these activities require significant outlays for necessary resources. We provide competitive wages for Research Analysts and Tutors working in the Lab. Our data purchases include several standard archival data sources supporting student/faculty research and senior theses, and sources such as Bloomberg and S&P Capital IQ are essential both for research and investment analysis by the Student Investment Fund and for class work. We heavily subsidize costs for the New York City Networking Trip, and the costs of sponsoring Athenaeum talks and many other CMC and Consortium-wide activities are a substantial portion of our overall budget.
All of these activities provide great value to FEI constituents. The opportunity to work closely with faculty is one of the key aspects adding to a CMC education, and the quality of this work in our Lab is extraordinary. The same can be said for student experience across the CMC Institutes. Our students are well aware of this, and the long-run success of students who worked in the FEI Lab speaks for itself. Similarly, Sequence students must write and defend an empirical thesis in finance as the capstone to their experience. This could not happen without the archival data we help to provide. The rigor required to write and successfully defend a thesis is another key step towards doing effective work after graduation. Again, the record of graduates with the FES designation is remarkable. The great value of the Networking trip in exposing students to various types of job paths within the financial sector, and the networking opportunities on the trip, cannot be overstated. The value to SIF members of access to high quality data sources and oversight from the FEI Associates provides great practical experience to students interested in pursuing careers in finance. The speakers we bring to the Athenaeum and other venues have been very high quality and drawn sellout crowds.
The accomplishment by those who did the heavy lifting in the drive, and the generosity of all those who gave, helps ensure the FEI will continue to provide valuable experiences for so many students in the coming years.
Separately, during the 2016-17 academic year, the Advisory Board created a Strategy Committee to review the mission and main activities of the FEI. It has been well over a decade since the formation of the FEI, and within a few years we will undergo a thorough external review. This committee started by reviewing the mission statement and modifying it to suit the evolution of student needs and what we do going forward. The new statement reflects the three areas noted above: the research, curricular component, and extra-curricular activities supported by the FEI. Over the next couple of years, the committee will be examining individual aspects of our programs to ensure we are providing the greatest value to our constituents. Expect to see more about this process over the next couple of years.
The important announcements above leave me little room to report on our usual activities, but a few things are worth noting here. Over the summer, FEI Associate Director Prof. Batta and I worked with the Library to collaborate on acquisition of a few new databases, notably two significant enhancements to our S&P COMPUSTAT subscription, now including their Global database (previously we only had U.S. data) and Point In Time data; and the Wind database, which compiles Chinese markets data. We employed 26 students in the Lab during the Fall Semester. In collaboration with the RDS, we chose 17 students from a competitive field to participate in the NYC Networking trip in January. In September, we sponsored an Athenaeum talk by Steven N. Kaplan, the Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago’s Booth School of Business. Steve is among the world’s leading experts on entrepreneurship and innovation, and co-founder of the New Venture Challenge at Booth.
Finally, as you have been aware from previous Director’s Reports, Terri Van Eaton retired at the beginning of September, after providing wonderful service for many years. We are very lucky that going forward, Nancy Faust has taken the position of Assistant to the Directors. Nancy has been with CMC working as the RDS Administrative Assistant since 2002, so she was already thoroughly familiar with the workings of the entire school, and she has done a wonderful job since day one. I look forward to working with her over the next several years.
Director’s Report and Tribute to Terri Van Eaton – Spring 2017
THE 2016-17 academic year marked some significant changes for the FEI and was punctuated with successful special events. Regarding ongoing activities, as always we had a full slate of student Research Analysts working on projects with faculty, provided access to databases, and this year eleven seniors completed the Financial Economics Sequence. Since the Fall newsletter, we cosponsored, with the Robert Day Scholars program, a very successful New York City Networking Trip in January (see Networking Trip article nearby) and with both the RDS and Pomona College’s Sagehen Capital Management, we cosponsored the Student Investment Fund’s Claremont Finance Conference (see Student Investment Fund article nearby). We continue to provide student tutors in the FEI Lab for Bloomberg, Capital IQ, Excel, Python, and Stata. We also sponsored a second year of workshops on financial literacy and valuation put on by the Student Investment Fund (SIF).
Regarding change, first the FEI has now completed its first full year with the new Board of Advisors (see listing nearby), which has already proved to be a highly productive development. We have established several committees of the Board to help with strategic guidance and related issues and look forward to working with them over the next several years. The full Board and the committees are working on a broad array of issues and have already provided many useful suggestions regarding programming, outreach, advancement, and data acquisition. We are grateful for all the support the Board provides. We especially thank the Board Chair, Jim McElwee ’74 P’12, and the two Vice Chairs, Alan Heuberger ’96 and John Shrewsberry ’87, for their leadership and help in shaping the new Board structures.
Second, we completed the second year with our new FEI Associates, with David Brown ’00 as Chair. The Associates have provided excellent oversight for the Student Investment Fund (see 20162017 SIF CEO Kaitlyn Kelleher’s nearby article). The contributions and enthusiasm of the members of this group have been wonderful for the FEI and the SIF. The SIF executive team made two excellent presentations to the Associates at the board meetings during the year, and the feedback from the Associates is proving highly valuable to the SIF members. Our closer connection with the SIF has yielded several opportunities for them, the FEI, and the broader CMC community, including both of the financial literacy workshops, the annual Claremont Finance Conference, featuring Maureen Downey ’93 as the Keynote dinner speaker at the Atheneum. She gave an excellent talk on impact investing. The FEI and SIF also hosted a presentation open to all CMC students by Brian Callaci P’20, Managing Director at Moelis & Co., Los Angeles. Another connection between the FEI and the SIF was FEI’s sponsorship of the third annual BMGI Pitch Competition that took place on campus at the end of January. This event brought together the student investment funds from CMC and the other Claremont Colleges. A team from each participating fund pitched a company to a panel composed of CMC graduates, including Michael Larson ’80, CIO of BMGI, followed by a networking reception. There were over a hundred people in attendance this year, our best attended pitch event to date.
Third, we completed our shift to providing Capital IQ as one of our major data offerings, with a subscription now large enough to provide individual access to many finance-related faculty members across the Claremont Colleges, all SIF members, all FEI RA’s, several classes during the academic year, and access for all CMC students via computers in the FEI Lab, as well as Poppa, Ryal, and South Labs. We believe this has been a major improvement in our data offerings. We continue to evaluate data provision to optimize this over time.
In April, the FEI was pleased to cosponsor, with the Marian Miner Cook Athenaeum, a moderated lunch program at the Atheneum featuring Neel Kashkari, President and CEO of the Federal Reserve Bank of Minneapolis. Mr. Kashkari generously offered his time after the luncheon to meet exclusively with 14 students in a small conference room on campus. These students were given the opportunity to ask questions and converse with Mr. Kashkari during this hourlong meeting.
I’d like to highlight some FEI affiliated students who won academic awards at the end of this academic year: Andrew Yeh ’17 won the award for Best Thesis in Financial Economics; Jizi Lu ’17 won Best Overall Senior in Economics; and Amy Ingram ’17 won Best Thesis in Innovation & Entrepreneurship. Three of the five RDS Outstanding Sophomores in Economics worked as RAs at the FEI: Laira Aggarwal ’19, Yutao (James) Jiang ’19, and Andrew Lindquist ’19. Congratulations!
Finally, I want to take a moment to acknowledge Terri Van Eaton. Many of you know her from your time associated with the FEI as a student, a Board member, a parent, or through many other connections. Terri will be retiring at the end of the summer after working at CMC since 1979, concluding over 38 years of service, with the last 10 years at the FEI as Assistant to the Directors. Service is not an adequate word. She is so well respected by the entire community, so loved by generations of students (flowers arrive each birthday from students from years gone by, former students returning to campus visit her before any professors, etc.), so immensely capable of handling the tremendous volume of highly varied work generated by the FEI, and just such a wonderful friend and colleague, that I cannot say how sorry I am to see her go, but also how delighted for her next steps. Terri, I will miss you.
Terri is highly modest, but she has agreed to let us establish an endowment in her name, the Terri Van Eaton Research Analyst Fellowship, to support several students working in the FEI Lab each year. Terri’s request, when I approached her about such a fund, was that it should be directly related to students, and this seems a very fitting tribute to her many significant and valuable contributions to our students over the years. If you wish to contribute to this fund, please contact Kaitlyn Plummer in the Development Office at (909) 6074255 or email her at Kplummer@cmc.edu. Or you may go online to make your gift or pledge at https://online.cmc.edu/institutes/feigiftpage.
Director’s Report – Fall 2016
FALL 2016 PROVED to be a busy time for the Financial Economics Institute. In addition to our usual program of activities, we completed the transition noted in our last report regarding our board structure. We worked through the Summer and well into the Fall semester to set up the new FEI Advisory Board, and are happy to report that we had our first meeting in early December. We also had the second meeting of the new FEI Associates earlier in the semester. The support and enthusiasm from these two groups has been great, and we look forward to working with both groups going forward. Discussions are underway in several directions, including data, strategy, and possibly a conference on impact investing sometime next year.
Another key development this Fall is that Associate Professor George Batta agreed to serve as Associate Director of the FEI for the next four years. Prof. Batta has a strong research record with a niche particularly in debt and derivatives pricing and functions in financial markets. He teaches highly sought-after courses in Financial Statement Analysis to both our undergraduate and Master’s of Finance students. I am delighted he has joined our team and look forward to working with him over the next several years.
In addition to the Board activity, during the Fall we ran our full program of events. Early in the semester we provided a well-attended information session about the FEI. We received a large number of new applications for FEI Research Analyst positions, and hired 24 students, including three of the six 2016-2017 BMGI/Michael Larson Asset Management Fellows. Among these research analysts we also have tutors for Stata, Excel, Python, Capital IQ, and Bloomberg. Elsewhere in this report we provide information on individual projects with faculty. Mid-Fall we hosted two information sessions regarding the jointly sponsored FEI/Robert Day Scholars New York City Networking Trip which will run from January 8-12, 2017. We then worked with the Office of Student Opportunities to choose 18 students from a strong field of applicants and organized the details of the trip. We look forward to seeing many of you in NYC next month.
In addition to joint student/faculty projects, we continued our Southern California local finance focus, and we are pleased to announce that a summary of SoCal transaction activity, put together by Matthieu Hafemeister (CMC ’17) is now available on our website. We note that Matt will be joining Andreessen Horowitz in Menlo Park, CA after graduation. We expect to add our SoCal Equity Indices to the website early next Spring.
This Fall we once again sponsored the Student Investment Fund (SIF) presentation of a Personal Finance and Investing seminar, open to all 5C students. This valuable seminar covered topics ranging from how to manage a bank account, understanding present value concepts,investing for medium range and retirement, to alternative types of investment vehicles,among other topics. The FEI is grateful forthe efforts of the SIF in putting on this valuable seminar. A second seminar focused more on valuation will occur during the Spring semester. We particularly acknowledge the hard work by SIF CEO Kaitlyn Kelleher (CMC ’17) and SIF Director of Events Roma Forest (CMC ’19) in putting together the Fall semester event.
In September, we co-sponsored with the Robert Day Scholars program a two-day Data Science workshop attended by Day Scholars and Financial Economics Sequence students. This workshop was primarily an introduction to using Python to collect, organize, and analyze data sets from the web, with a specific focus on methods tailored to finance.
On the data front, we completed our transition to Capital IQ noted in previous newsletters. This year we have greatly expanded our subscription, and now are able to provide individual licenses to all SIF members. In addition, we are now able to provide general access for all CMC students to use Capital IQ via all FEI Lab computers and 10 computers in Poppa Lab. We believe this is a great resource for the CMC SIF, the FEI, and the broad CMC community.
Finally, as always, I am grateful for the support from so many people, including the FEI Advisory Board and FEI Associates members, Terri Van Eaton for her tireless and excellent work supporting so much activity at the FEI, and now Prof. George Batta as our new Associate Director.
Director’s Report – Spring 2015
THE 2014-15 academic year proved successful for the FEI as we continued existing programming and began looking to expand our reach in some directions. Regarding continuing programming, we employed 32 students during the Fall and Spring semesters, hired 8 full-time RAs last summer and we’ve hired 7 full-time RAs for this summer, co-sponsored and participated in the New York City Networking Trip, helped organize and sponsored a pitch event for the CMC Student Investment Fund and two finance conferences, brought in Randall Kroszner as an Athenaeum speaker, and continued to support students by providing tutors for the Bloomberg Terminal as well as Excel, Python, and Stata. On the initiative front, we expanded programming in several areas, including data and tutoring support, local finance-related programming, social impact support (co-sponsoring a trip by 17 CMC students to attend a conference and training program regarding local microfinance via the In-Lend organization), and participated in the Research Institute Fair on campus on April 3rd (we thank Ed Leathers ’15, for his excellent representation of the FEI at the event).
During the 2014-15 academic year, 11 students successfully completed the Financial Economics Sequence, and Joshua Thomas won the prize for Best Thesis in Financial Economics for his thesis titled 10b5-1 Plans and Earnings Management by High-Level Executives, in which he showed that firms manipulate earning ahead of stock transactions under these plans in order to obtain favorable pricing at transaction time. We would also like to note that one of our FES graduating seniors, T. Connor Schlegel, was awarded the Best Thesis in Economics, for his thesis on Strategic Risk Taking in Tournaments through the Lens of PGA Match Play. Another FES graduating senior, Elan Bernstein, won the Outstanding Achievement in Quantitative Economics award. A past FEI RA and current BMGI/Michael Larson Asset Management Fellow, Andrew Dodds, won the award for Best Senior Overall. The awards were announced at the Robert Day School of Economics and Finance Awards Night at the Athenaeum on May 4th.
Our previous report noted the Fall 2014 Southern California Finance Conference organized by Professors Mitch Warachka and Eric Hughson, with keynote speaker Professor Ivo Welch of UCLA, as well as the Student Investment Fund pitch event including representatives of BMGI and WestRiver Capital. We followed those up this Spring by helping to organize the Student Investment Funds’ Claremont Finance Conference on February 13, 2015, co-sponsored with the Pomona College and Scripps College Student Investment Funds. The conference included a luncheon at the Athenaeum with a Keynote talk by Don Gould ’79 POM, President and Chief Investment Officer at Gould Asset Management, panel sessions at the Freeberg Forum, a networking and cocktail reception, and dinner at the Athenaeum with Keynote Speaker Shaw Wagener ’81, Chairman at Capital Group International and CMC Trustee. The event was cosponsored by the Robert Day School of Economics and Finance.
As part of the FEI Speaker Series, the Institute brought Randall S. Kroszner to CMC as an Athenaeum speaker the evening of February 12, 2015. Kroszner is the Norman R. Bobins Professor of Economics at the University of Chicago’s Booth School of Business, twice served on the Council of Economic Advisers to the President, and from 2006 to 2009 served as a Governor of the U.S. Federal Reserve System. As such, he played an important role in the Fed’s actions to mitigate the financial crisis that began in 2008. His talk at the Athenaeum focused on the Fed’s responses to the financial crisis, as well as initiatives to improve the stability of the financial sector and provide consumer protection and disclosure for credit cards and mortgages. The Lowe Institute of Political Economy co-sponsored Professor Kroszner’s visit to CMC.
In January, the FEI and RDS jointly sponsored the New York City Networking Trip, taking 14 students to see a range of firms across a variety of service types and sizes within the financial sector. A highlight was our visit to the floor of the New York Stock Exchange. Several students interviewed with firms while on the trip, and some will be doing their summer internships this summer with firms we visited in January. We thank Michelle Chamberlain for her excellent work organizing and leading the trip.
During the year, we made progress on several initiatives. First, regarding data, we reviewed our existing data offerings (we thank Gabriel Ayala ’16 for his excellent work compiling this review) during the year and added two new databases from Bureau Van Dijk noted in our Fall report. We subsequently sponsored a video conference training session for our faculty and students provided by a Bureau Van Dijk support specialist. We consider data to be a high priority for the FEI, and over the summer will be looking to add several additional databases. We are also pursuing a strategy for incorporation of big data into the FEI. As noted in the Fall newsletter, we hired Aviv Caspi ’16 to provide Python tutoring and support, and he assisted in a senior thesis analyzing text components as part of a broader analysis of project financing via crowdfunding site Kickstarter. We are also in negotiations with an outside group to provide support for development of access to CommonCrawl, a web imaging project, for projects in finance.
Second, during the Spring semester, we had two teams working on projects in local finance, one team constructing indices by geographic and industrial sectors for publicly traded firms headquartered in California. A second team began research on measures of deal activity in California, leveraging as one source of information one of the new databases purchased last Fall. These will appear on our new website, slated to go online later this year. Though not yet begun, we also plan a real estate analysis component for Southern California real estate segments.
Looking to next year, we anticipate working more closely with the CMC Student Investment Fund on several aspects of our programming. Our tentative plans include collaboration in bringing FEI/SIF alumni to campus for information sessions, and SIF participation in financial literacy training.
Finally, in closing, on behalf of myself and the many students and faculty who have benefitted from the FEI’s activities this year, I thank both Terri Van Eaton and Brian Dennis for their excellent work at the FEI. Also, as always, I am grateful to the Robert Day School Board members and others for their generous contributions which make these activities possible.
Director’s Report – Fall 2014
THE FEI BEGINS its second decade this year. By all measures the first decade was a great success. Starting with just three graduates receiving the Financial Economics Sequence certification in 2005, the annual numbers rapidly grew to near 30 per year. More recently the number of Sequence graduates has declined, but including those obtaining the BA/MA degree, overall interest in finance remains strong. Through Spring 2014, 174 CMC graduates earned the Sequence certification. Over the same period, the research experience for undergraduates working as Research Analysts in the FEI Computer Lab has been a key component of the Institute activities. Each semester since 2005 roughly 15-20 students have worked in the lab, and as of Spring 2014, 97 CMC graduates had experience as FEI RAs.
Starting the second decade, interest in the various aspects of FEI programming remains keen. Over the summer, eight students worked in the FEI Lab as RAs. This fall, 44 students attended the annual Information Session at the start of the school year, and 51 students applied to be RAs. Currently 17 students are working on projects with faculty, including one BMGI/Michael Larson Asset Management Fellow. Four students provide tutoring through the lab covering Bloomberg (by a second BMGI Fellow), Excel, Stata, and Python programming. In just a few weeks, we will depart with 15 CMC students (10 juniors and 5 sophomores) for the annual New York City Networking Trip jointl sponsored by the FEI and the Robert Day School. The CMC Student Investment Fund continues its activities, and Professor Eric Hughson continues to guide them through his course (Econ 194A) which is now in its fourth year. Currently, 40 students across the four classes have expressed their intent to the Registrar’s Office to complete the Financial Economics Sequence, including 13 seniors, 15 juniors, 9 sophomores, and 3 freshmen.
As reported by the previous Associate Director, Professor Hughson, in the Fall 2013 newsletter, the FEI and RDS boards were merged and various activities of the two organizations were folded together. Upon assuming the duties of FEI Director, I committed to the RDS Board to undertake a new strategic plan over the coming year, with the aim of focusing the Institute activities on areas of greatest impact. We do not expect to provide much detail on this before next fall, but already several changes are in process.
As part of the new regime, Brian Dennis, the Director of Administration and Programs in the Robert Day School, is working closely with me on program planning. We expect this change in administration will enhance cooperation between the FEI and RDS. Brian will also play a key role in developing the new strategic plan. We are already working together on an assessment of the data offerings made available through the FEI and the creation of a new Institute website. We added two new data offerings this fall, one on international data and one on deal activity. Look for the new website sometime next spring. This semester, both Brian and Michelle Chamberlin from the RDS staff worked on the NYC Networking Trip.
One change which took place at the beginning of the fall semester was the addition of a student Python tutor to the FEI Lab. In the Spring 2014 newsletter, Professor Hughson noted the fine thesis on municipal bond pricing written by Carter Wilkinson, for which Carter won the Best Finance Thesis award. An interesting aspect of his thesis was Carter’s use of data collected from the web using a Python-based web crawler. We believe Carter’s work shows the way to innovation in our approach to student research. In order to enhance the tutoring offerings of the FEI in this direction, this fall Aviv Caspi ’16 was hired as a Python programmer/tutor and he has helped other students with similar efforts, and we are exploring additional avenues to bring computer science, big data, and new methods of analysis to the Institute.
Special thanks go to Michelle Chamberlain, Director of External Relations at the RDS, who has organized a great New York City Networking Trip for January 2015. Students will arrive on Sunday, January 11, and participate in numerous scheduled firm visits, dinners, and alumni events through Thursday, January 15, with Friday reserved for interviews and sight-seeing opportunities. Along with the firm visits, we will visit the floor of the New York Stock Exchange and the 9/11 Memorial Museum.
Last month, with organizational aid from Lizzie Fitzpatrick of BMGI, the FEI hosted an event bringing together the Student Investment Funds from CMC, Harvey Mudd College, and Scripps College. A four-person team from each SIF pitched a company to a panel composed of CMC graduates Michael Larson ’80, Alan Heuberger ’96, John O’Brien ’02 and William Knowles ’13, all of BMGI; and Erik Anderson ’80 of WestRiver Capital, Inc. The opportunity to present before and receive comments from this panel was highly valuable for the student teams from all three colleges, as well as for the many other students in attendance.
In another important change related to BMGI, this year both the BMGI/Michael Larson Asset Management Fellowship stipends and research support amounts were substantially increased, benefitting several students each year. We are grateful for both the participation in the pitch event noted above and BMGI’s generosity in supporting our students.
This fall, the FEI also sponsored the second annual Southern California Finance Conference organized by Professors Mitch Warachka and Eric Hughson. The conference featured keynote speaker Professor Ivo Welch of UCLA as a luncheon speaker at the Athenaeum, where he spoke about corporate capital budgeting. A theme of the conference was market efficiency. More detail on the conference is provided in Professor Hughson’s summary of the conference in this newsletter.
Before closing, I want to take a moment to thank Terri Van Eaton for her great work at the FEI. Her interaction with the students is critical for making the FEI Lab a success, and over the past several months, her comprehensive knowledge of the Institute and good cheer imparting it to me has been indispensable as I have started work at my new post with the FEI.
Finally, I would like to thank the RDS Board and numerous others for their contributions to the FEI. The FEI provides many valuable experiences for our students, including networking, tutoring, opportunities to work with faculty, and access to data, hardware, and a space to work, but none of these would be possible without the generous support of many individuals.
Directors’ Report – Spring 2014
THE FINANCIAL ECONOMICS Institute completed its tenth year this spring. The FEI is the financial research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and providing research experience, networking opportunities, and educational and career support for students. This spring, the FEI hired fifteen student research analysts and again expanded its tutoring program to include instruction in Excel, which was a skill identified by students as important for success in summer internships.
One role played by the FEI is to sponsor the Financial Economics Sequence (FES). After completing prerequisites in math, accounting, and econometrics, students take two core finance courses and three elective courses. Seniors must write a finance-related thesis and orally defend that thesis in a presentation to faculty to receive the Sequence designation on their transcripts. Eight seniors completed the Financial Economics Sequence this year, and an additional fifteen juniors, fourteen sophomores, and seven freshmen have indicated they are planning on completing the Sequence.
The Investment Management Practicum, taught by Professor Hughson, completed its third year this spring. The course meets weekly and is designed to add analytical rigor and support to the CMC Student Investment Fund. Buoyed both by a year of spectacular stock market returns, and large donations, the fund now has over $600,000 for students to invest each year. Next year, for the first time, the fund will finance a scholarship for a deserving student. We greatly appreciate those who made generous contributions to the SIF this year.
Students from the CMC and Pomona College Student Investment Funds organized the Claremont Finance Conference held on February 28th, with financial help from both the FEI and the Robert Day School and others. A more complete description of the conference, written by Carter Wilkinson ’14, is found later in this newsletter. Finally, five members of CMC’s fund participated in the CFA Institute Research Challenge at Chapman University on February 21st. The student team evaluated Reed’s Inc., a producer of specialty sodas. Despite an excellent thesis, able advice from their industry mentor, Nathan Doctor ’11, from Cascade Investment, and the fact that their “sell” recommendation was made when the stock price was $7.29 per share and the current stock value is only $5.28 (as of May 7), the team did not win the challenge this year. This prediction was not an artifact of large market losses. Over the same period, the S&P 500 index increased in value from $1836 to $1867.
Later in the newsletter, Madeleine Bannon ’14 and Julian Buckner ’14 describe the January New York City Networking Trip. Eighteen students visited twelve firms, learning about careers in finance, including areas such as investment management, trading, leveraged finance, investment banking, investment research, and central banking. The FEI and RDS also hosted and co-hosted two evening events with students, faculty, and alumni during the trip.
This year, FES senior, Carter Wilkinson, won the award for Best Financial Economics Thesis entitled, “Do Public Pensions Affect City Borrowing Costs? The Impact of Local Government Pension Contributions on Municipal Debt Yield Spreads.” His advisor was Professor Joshua Rosett. Carter analyzed the role of public pension costs on bond municipal bond pricing. Clearly, pension costs have figured in several important recent bankruptcies including Detroit and nearby San Bernardino, so it is not surprising that high pension liabilities could affect the rates at which municipalities can borrow. Carter’s main finding is that a one standard deviation increase in cumulative city pension cost as a percent of city revenue is associated with an increase in yield spreads of about 5.6 basis points. Given the amounts financed, this implies a large dollar penalty for having a large pension burden as a percentage of revenue.
We are grateful for the myriad contributions, financial and otherwise, made by the RDS Board of Advisors, and the BGI Fellowship Program which provides support for faculty-student research on investment management topics. The FEI relies upon annual gifts by the RDS Board and friends of the Institute to support our activities, and we appreciate the generosity of time and money that makes the FEI function.
Directors’ Report – Fall 2013
THIS FALL MARKED THE BEGINNING of the tenth year for the Financial Economics Institute. The FEI is the financial research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and providing research experience, networking opportunities, and educational and career support for students.
This year, the FEI experienced a change in governance as the boards of the Robert Day School and the FEI merged, with the former chairs of each board continuing on as co-chairs of the newly-formed board. Specifically, the co-chairs are Peter Barker ’70 P’01, retired Chairman of CA JP Morgan Chase & Co., and James McElwee ’74 P’12, an independent venture capitalist. While many details of the new governance structure remain to be resolved, one immediate benefit is that the RDS placement team (Michelle Chamberlain and Marisa Walter) is now working more closely with the FEI on its annual New York City networking trip. Financial contributions from RDS have allowed the FEI to boost the number of students participating on the trip from 14 to 18.
We currently have 44 students who indicated that they plan to complete the Financial Economics Sequence: 10 seniors, 14 juniors, 14 sophomores, and 6 freshmen, compared to 66 students last year. Part of the reason for this decrease is that some students who would previously have elected to complete the Financial Economics Sequence are now opting to complete the joint BA/MA program in finance (which can be completed within four years). Compared to the Finance Sequence, the BA/MA program usually requires that students take a greater number of finance courses, but does not require students to write and defend a finance-based senior thesis as the Finance Sequence does.
Professor Hughson’s Student Investment Fund course (Econ 194A) is now in its third year. Students are organized into groups that specialize in a particular industry or type of asset. Each student is responsible for two investment pitches per year. Average pitch quality seems to have increased this year with the implementation of critiquing groups who evaluate investment pitches prior to the class meetings. Industry participants evaluate some of the student pitches, either in person or through video- or audio-conferencing. This semester, Mark Robles ’78 - Alta Pacific Wealth Management, Henry Goodman of Shadow Tree Capital, and Nathan Doctor ’09 and John O’Brien ’01 from Cascade Investment participated.
For the third year, the Student Investment Fund is continuing its participation in the Chartered Financial Analyst (CFA) Institute Investment Research Challenge. Last year, the team won the regional Orange County competition. This year’s team will value Reed Inc., a producer of natural sodas. Nathan Doctor ’09, from Cascade Investment is the industry mentor, and Professor Hughson is the faculty advisor.
Other activities with FEI participation included last spring’s student-run Claremont Finance Conference, for which the FEI contributed financial support, and this fall’s Southern California Finance Conference (a two half-day academic conference held at CMC, and described later in this issue). In addition, the FEI sponsored a lunchtime Athenaeum talk (also highlighted in this issue) by David Hirshleifer, the Merage Chair of Finance at the Merage School of Business at UC Irvine. In his talk, titled “Social Economics and Finance,” Hirshleifer discussed how cultural norms and religious beliefs affect how people are influenced by others in their financial decisions.
As always, we are grateful for the myriad contributions, financial and otherwise, made by our Advisory Board and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. The FEI relies upon annual gifts by its Board and friends of the Institute to support our activities, and we appreciate the generosity of time and money that makes the FEI function.
Director’s Report – Fall 2012
THIS FALL MARKED the beginning of the ninth year for the Financial Economics Institute. The FEI is the financial research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and providing research experience, networking opportunities, and educational and career support for students.
We currently have 66 students who plan to complete the Financial Economics Sequence: 23 seniors, 29 juniors, 10 sophomores, and 4 freshmen.
The Student Investment Fund course (Econ 194A) is in its second year, taught by Professor Hughson. A typical class begins with student investment presentations and then, if time, is followed by a half-hour lecture from Professor Hughson on a valuation topic. Students are responsible for presenting one investment idea per semester, and they also critique one investment pitch. Outside speakers speak on various finance topics. This semester, David Bradley ’03, CFA and VP at Sirius Advisors, LLC and Rohan Rangaraj ’01, CFA and Co-Portfolio Manager at Sirius helped critique investment pitches and talked about their investment strategies. Russell Greenberg ’79, Founder and Managing Partner at Altus Capital Partners and FEI Associate Board Member, also critiqued a stock pitch.
This year, Robert Thomas ’99, CIO at The George Kaiser Family Foundation and FEI Board Advisor, is the industry advisor for the five-student team participating in the CFA Investment Challenge, a valuation competition sponsored by the CFA Institute. This year, the students will value Edwards Lifesciences, a medical technology firm. Professor Hughson is the faculty advisor. This is the second year a team comprised of CMC Student Investment Fund students will compete.
The FEI sponsored a “sold out” evening Ath talk on December 5, 2012, by Colin Camerer, the Robert Kirby Professor of Behavioral Economics at Caltech discussing “Neuroeconomics: How Brains Decide What Stocks to Trade and What Foods to Eat.” People are often too eager to sell winning stocks and hold on to losing stocks (even when they should do the opposite). Camerer also described which neural circuits are in charge of resisting temptation to choose unhealthy junk foods that taste good. Camerer explained that this anomaly, called the “disposition effect,” is related to neural activity in a particular brain region and he noted that in a series of simple games, chimpanzees’ behavior was far closer to optimal behavior than human behavior was.
As always, we are grateful for the myriad contributions, financial and otherwise, made by our Board members and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. The FEI relies upon annual gifts by its Board, Advisors, and friends of the Institute to support our activities, and we appreciate the generosity of time and money that makes the FEI function.
Director’s Report – Spring 2012
THE FINANCIAL Economics Institute completed its eighth year this spring. The FEI is the financial research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and providing research experience, networking opportunities, and educational and career support for students.
One role played by the FEI is to sponsor the Financial Economics Sequence. After completing prerequisites in math, accounting, and econometrics, students take two core finance courses and three elective courses. Seniors must write a finance-related thesis and orally defend that thesis in a presentation to faculty to receive the Sequence designation on their transcripts. Eighteen seniors completed the Financial Economics Sequence this year, and an additional 27 juniors, 19 sophomores, and 6 freshmen have indicated they are planning on completing the Sequence.
The new Investment Management Practicum completed its first year this spring. Taught by Professor Hughson, the course meets weekly and is designed to add analytical rigor and support to the CMC Student Investment Fund. This spring, Christine Mann ’87 from Goldman Sachs and Michael Larson ’80 from BGI visited campus to critique students’ investment ideas. Robert Thomas ’99 from the George Kaiser Family Foundation also performed a critique, but did so from Oklahoma via the new teleconference equipment on campus.
Later in the newsletter, Kevin Potterton ’12 describes the January New York City Networking trip. Eighteen students visited nine firms, learning about careers in finance, including areas such as investment management, trading, leveraged finance and investment banking. The FEI also hosted and co-hosted two evening events with students, faculty, and alumni during the trip.
Financial Economics Sequence students and FEI Research Analysts were wellrepresented in the RDS awards ceremonies this spring. Sequence student Alexandra Abramovitz won the Best Thesis in Finance award for her thesis “Are Women Impact Players: The Effect of Female Executives on Firm Performance and Capital Structure.” FEI Research Analyst and Sequence student Rosabella Magat won Best Thesis in Economics for her thesis “Effects of Early Round Venture Capital Syndication on IPO Exits in Europe and the United States.” Sequence student Jason Rehhaut won Best Thesis in Accounting for “Past Financial Reporting Credibility: Does it Influence Market Perceptions of Fair Value Assets?” Kevin Potterton, FEI Research Analyst and Sequence student, won Best Overall Economics Student, as well as Outstanding Achievement in Quantitative Economics. And FEI Research Analyst Sze Wai Yuen won Best Senior in Accounting.
The FEI Board welcomes Scott Arnold ’09 as a new Associate member, beginning in July. Also new to the FEI’s Board are three Fellows (recent alums who continue to contribute in a meaningful way to the mission of the FEI): Kyle Casella ’10, Maria Lohner ’10, and Nicholas Sparks ’10. This May, Kyle, Maria, and Nick ran a seminar for juniors who will begin investment banking internships this summer, covering aspects of summer internships ranging from proper attire to LBO modeling. They are also organizing a summer mentor program for juniors interning in finance jobs this summer.
As always, we are grateful for the myriad contributions, financial and otherwise, made by our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. The FEI relies upon annual gifts by its Board of Advisors, Associates, and friends of the Institute to support our activities, and we appreciate the generosity of time and money that makes the FEI function.
Director’s Report – Fall 2011
THIS FALL MARKED the beginning of the eighth year for the Financial Economics Institute. The FEI is the financial research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and providing research experience, networking opportunities, and educational and career support for students.
We currently have 73 students who plan to complete the Financial Economics Sequence: 29 seniors, 25 juniors, 16 sophomores, and 3 freshmen.
Later in the newsletter, Viken Douzdjian ’13 provides an update on the Student Investment Fund course, an investment management practicum designed to add analytical rigor and support to the Student Investment Fund. Professor Hughson taught the course this fall. A typical class meeting involves a half hour lecture from Professor Hughson on a valuation topic, followed by student investment presentation(s). Students are responsible for pitching one investment idea per semester, and also providing a critique for one of the investment pitches per semester. Additionally, outside speakers speak on various finance topics. This semester, for example, Samuel Kadziela from the Chicago Trading Company, a derivatives market maker, gave an evening presentation to the students. A five student team in the class is also participating in the CFA Investment Challenge, a valuation competition sponsored by the CFA Institute.
Also new this year is an expanded number of networking trips. In addition to our traditional New York City Networking trip (which takes place during winter break), we sponsored (along with the Robert Day School) a Los Angeles finance networking trip last spring, and a Los Angeles finance and accounting networking trip this fall (attended by about 75 students).
The FEI also sponsored an evening Ath talk by John Shewsberry from Wells Fargo and a member of the FEI Board of Advisors. In a talk much appreciated and commented on by the students, John mapped out various careers and job opportunities in the world of finance, attempting to draw the students’ attention to areas beyond those traditionally recruiting on campus.
As always, we are grateful for the myriad contributions, financial and otherwise, made by our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. The FEI relies upon annual gifts by its Board, Advisors, and friends of the Institute to support our activities, and we appreciate the generosity of time and money that makes the FEI function.
Director’s Report – Spring 2011
THIS YEAR WAS the eighth year for the FEI. The FEI is the finance research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and more importantly, providing research experience for students. There are currently 88 students in the Financial Economics Sequence: 22 seniors, 35 juniors, 22 sophomores, and 9 freshmen. Usually, we have FEI students summarize the public lectures of finance academics for the newsletter, and this year is no different. In this issue, Sara Reed will summarize Jonathan Berk’s talk about the implications of economic theory for managerial performance in the mutual fund industry. What I would like to do is highlight some of the research our students are doing.
I would like to begin with the student who won the award for best thesis in financial economics, Kaitlyn Desai. It is well known that store gift cards sell at a discount relative to face value on the secondary market. In her thesis, Kaitlyn identifies the determinants of this discount. One obvious reason that the cards sell at a discount is that the stores that issue them sell similar goods at higher prices than can be obtained elsewhere. But even after accounting for that, the puzzle remains. What Kaitlyn finds is that the differences in discounts across retailers can be partially explained by the different risks that these retailers have of going bankrupt. In bankruptcy, there is both a possibility that the retailer will no longer honor the gift cards and also a possibility that the selection of merchandise available will be limited. One seeming problem with this explanation is that if a retailer is currently not bankrupt and its cards were selling at a significant discount then somebody could buy the cards on the secondary market and immediately use them. This should push the price of the gift cards up, and bankruptcy risk should no longer matter.
But Kaitlyn argues convincingly that bankruptcy risk should be a problem anyway. This is because these cards are held for a significant time by middle-men such as Plastic Jungle. If Plastic Jungle cannot re-sell the cards right away, there is a possibility that a retailer will go bankrupt during the time Plastic Jungle is holding the cards. To reduce the risk that Plastic Jungle is left holding worthless plastic, it discounts the cards so that they sell more quickly, and the discounts are higher when retailers are in financial distress. This is a nice contribution, and we hope that because she will have so much free time as an Analyst at Deutsche Bank, Kaitlyn decides to devote more effort to publish the paper.
Another nice thesis this year was Scott Yingling’s investigation of the personal stock transactions of U.S. Senators. It is not well known that U.S. Senators are exempt from insider trading regulations. Further, it is clear that senators can have private information that can affect firm value. The motivating example Scott uses is the anecdote that Dick Durbin supposedly sold stocks after attending a closed-door meeting in September 2008 where he learned that the financial crisis was worse than expected. Indeed, Congress is aware of the problem, and legislation has been introduced to halt congressional trading on inside information.
Perhaps surprisingly, Scott finds that senators do not make abnormally large profits on their trades after accounting for risk. This is true even for senators who leave office, so that there is no need for them to eschew insider trading in order to be reelected. But he postulates that the reason for the non-result is that measuring abnormal returns for congressional trades is difficult because congressmen are not required to report either the magnitudes of their trades or the day those trades are made. To really address whether or not congressmen profit from their insider information through trading requires that they report exactly when and how much they trade.
On the teaching front, we will begin teaching Econ 194, Investment Management, next fall. This course is built around the CMC Student Investment Fund and is designed to give students a practical experience in valuation and asset allocation— with some academic content. Our new videoconferencing equipment has been installed, and we will be contacting some of you in the near future to ask if you would help us with evaluating student investment pitches.
Thanks to a partnership with the Robert Day School, we have been able to expand not only practice interviewing, but also student networking trips. We now sponsor three trips: one in Los Angeles in the spring geared to sophomores looking to learn about jobs available in finance; another in Los Angeles in the early autumn, and our January New York Trip. This is helpful because the New York trip has served as a springboard for junior student interviews for internships, and sophomores had been crowded out. We are hoping that the additional exposure will help our students be more competitive for internships as well as for full-time employment. This year, at least, students have been more successful at securing internships in finance than they had been in previous years.
Director’s Report – Fall 2010
THIS MARKS THE beginning of the seventh year for the Financial Economics Institute. The FEI is the finance research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and more importantly, providing research experience for students.
We currently have 85 students who plan to complete the Financial Economics Sequence: 26 seniors, 33 juniors, 19 sophomores, and 7 freshmen.
This year, we are continuing with building a course around the CMC Student Investment Fund, an investment management practicum, which I will teach. The objective is twofold. First, we want to provide academic content in valuation and asset allocation to better help students justify their investment decisions. And second, in order to ensure that students gain practical experience as well, we have purchased new videoconferencing equipment to improve the quality of the feedback that students get on their presentations. This equipment is due to be installed over winter break, well ahead of the time we will need it for the class. We know how hard it is for those particularly on the East Coast to interact with our students on a regular basis and we would like to increase that amount of interaction.
The new videoconferencing equipment will arrive in time to be useful for placement efforts this year. This January, we plan to use the equipment both for practice interviewing and group discussions about interviewing with practitioners. Another placement issue that has arisen is that the focus of the New York Networking Trip has shifted and is now less informational and much more focused on interviewing. Hence, we have more juniors and fewer sophomores than ever on the trip. Because of this concern, we are planning a Los Angeles Networking trip in the spring that is more focused on underclassmen learning about finance practice.
Every year, we update the facilities in our FEI lab to improve the research environment. This year, we have added two new Bloomberg terminals to the lab, so that we now have three, rather than one. We now have reasonable access to up-to-date financial information.
Finally, we are sponsoring at least one public lecture by a respected finance academic at the Marian Miner Cook Athenaeum. Professor Jonathan Berk, from Stanford University, will come to campus for about a week where he will give a talk for students on the mutual fund industry as well as a research seminar for faculty and students. The support for these activities is made possible by generous contributions from our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics.
Director’s Report – Spring 2010
THIS YEAR WAS the seventh year for the FEI. The FEI is the finance research arm of the Robert Day School of Economics and Finance, which provides data and research support for faculty, and more importantly, provides research experience for students. Last year, I reported that we had an article co-authored with a student accepted at the Journal of Financial Economics. Next year, this student will be joining the MIT finance doctoral program. Lest anyone think that this is unusual, we have another collaborative effort (with entirely different co-authors—Tejas Gala and Professor Fan Yu) which has a revise-and-resubmit at the Journal of Financial Economics.
Of course, few of our students pursue academic careers, and it is our job to help students get where they want to go. We think that in addition to the courses they take, the research that the students do that is associated with the FEI helps prepare them for success in their chosen careers.
Some of our academic efforts are, however, more practical. This year, we are building a course around the CMC Student Investment Fund. The objective is twofold. First, we want to provide academic content in valuation and asset allocation to better help students justify their investment decisions. Second, we want to improve the quality of the feedback that students get on their presentations. This second objective will be accomplished by enhanced videoconferencing so that finance practitioners can observe and provide feedback on student presentations remotely. We know how hard it is for those particularly on the East Coast to interact with our students on a regular basis. We’re hoping this will help increase the amount of interaction.
This year, we sponsored three public lectures by respected finance academics at the Marian Miner Cook Athenaeum. Professor Chester Spatt, from Carnegie Mellon University and former chief economist at the Securities and Exchange Commission, spoke in November about the efficacy of government regulation associated with the current financial crisis. In March, Professor Peter Bossaerts (see article in this issue) of Caltech spoke about the frontiers of neurofinance. Finally, in April,Wayne Ferson (see article in this issue) of USC spoke about how portfolio managers should use alpha. Next fall, we will have a visiting scholar, Jonathan Berk from Stanford University, on campus for a week where he will give a talk for students as well as a research seminar for faculty and students. The support for these activities is made possible by generous contributions from our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics.
As you know, the job market for our students has been less good the last two years than it had been previously. Hence, our students need to look more competitive. As a result, the FEI has initiated a series of resume evaluations and practice interviews (both inperson and on the phone) to help students prepare for (1) interviewing for internships in late January and (2) interviewing for permanent jobs in September. The interviewers for internships are senior students who have been through the process, and the interviewers for permanent jobs will be young alumni(ae). The first practice super day was successful enough that to the FEI’s relief, it was taken over by our Robert Day School Placement Director, Michelle Chamberlain, and has been expanded to serve also the Robert Day Scholars. We have also tried to make sure that on our New York Networking Trip, students interview for internships. At least four of the trip’s participants landed an internship based on contacts made on the trip.
On the job front, 22 of our 28 seniors have firm plans for next year—only six are still looking. This compares favorably with last year’s statistics, where at the same time, about 70 percent of the class had plans. Regarding our rising seniors, for this summer, 19 FEI students and former RAs have outside internships and one will be working at the FEI.
Finally, we are very pleased to welcome new FEI Board Advisors, Kurt Hocker ’88 and John Shrewsberry ’87. Kurt is currently a Senior Vice President and Manager, National Banking at Union Bank. He replaces Phil Flynn ’79 on the Board. Although we are very sorry to lose Phil, who took a position at a bank in Wisconsin, we are very happy to maintain our relationship with Union Bank. John Shrewsberry is an Executive Vice President and Group Head at Wells Fargo. We also wish to announce the addition of two new FEI Board Associates, Christine Mann ’87 and John O’Brien ’02. In addition, there has been a change at Cascade Investment. We are sorry that Justin Hance ’06 will not be continuing as an Advisor, but his shoes will be well-filled by Alan Heuberger ’96, who was formerly an Associate. John O’ Brien will be taking Alan’s place as an Associate on our Board. Last, we wish to welcome Christine Mann ’87 to our Board as an Associate. She is currently a Vice President at Goldman Sachs.
Director’s Report — Fall 2009
THIS YEAR, THE FEI embarked on its sixth year. The FEI is the finance research arm of the Robert Day School of Economics and Finance, providing data and research support for faculty, and more importantly, providing research experience for students. Indeed, in the last two years, three coauthored collaborations between faculty and students have been published, one in Journal of Financial Economics, one in Economics Letters, and one in the China Economic Review. To our knowledge, this is the first time an undergraduate has ever had a publication in Journal of Financial Economics, which is one of the top finance journals. In addition, the FEI administers the Financial Economics Sequence, which each year, is completed by over thirty graduating seniors—over ten percent of the entire senior class!
This year, we are sponsoring two public lectures at the Athenaeum by respected finance academics. Professor Chester Spatt, from Carnegie Mellon University and former chief economist at the Securities and Exchange Commission, spoke in November about the efficacy of government regulation associated with the current financial crisis. Wayne Ferson of USC is coming this spring. In addition, we hope to have a visiting scholar, Jonathan Berk from Stanford University, on campus for a week where he will give a talk for students as well as a research seminar for faculty and students. Finally, this year on March 5, 2010, the FEI will have an academic finance conference. The support for these activities is made possible by generous contributions from our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics.
This was also the first year of the Robert Day School Master’s Program in Finance, which is staffed entirely by FEIaffiliated faculty. The first incoming class has twenty students, and although it is too early to call the program a complete success, student quality is high and students appear to be receiving employment offers. As of this date, roughly half of the class has had employment offers.
We were very sorry to say good-bye to Brian Denis, who is now the Director of Administration and Programs at the Robert Day School of Economics and Finance. Brian was the Assistant Director of the FEI for the first five years of its existence and was instrumental in not only the day-to-day operations, but also in advising students and organizing the New York Networking Trip. As the Director of Administration and Programs at the Robert Day School, he has been instrumental in using the New York model to create a San Francisco Networking Trip for the students in the new Finance Master’s Program. We miss Brian’s many contributions to the FEI, even if he has just moved downstairs.
Finally, we are very pleased to welcome two new FEI Board Associates, Kerry Fanwick and Jim Koon. Kerry is a 1976 graduate of CMC as well as a graduate of Stanford Law School. He is currently the Executive Vice President, General Counsel and Secretary at BRE Properties, Inc., a REIT that manages over 80 communities and 25,000 units in the Western U.S. Jim is a 1981 CMC graduate who holds an MBA from Duke University. He is now a Consumer Lending Division Executive for TCF Corporation, and is responsible for the performance of their mortgage lending business.
Director’s Report — Fall 2008
THIS YEAR, THE FEI embarked on its fifth year—and my first year as director. The FEI is the finance research arm of the Robert Day School of Economics and Finance. Since its inception, nearly one hundred students have been associated with the FEI as Research Analysts, completing projects in conjunction with faculty members from the Claremont community. Further, the FEI provides data and other research support for the faculty. It also sponsors public lectures by respected finance academics at the Athenaeum—this year, our speaker series will feature Darrell Duffie of Stanford University, who is an expert in credit risk. Finally, the FEI sponsors a conference every two years on a topic of interest to students, finance academics, and finance professionals. Our last conference, in Spring 2008, was a joint conference with the LRN-RAND Center for Corporate Ethics, Law, and Governance on The Future of Securities Fraud Litigation. We also co-sponsored the PEIF Political Economy of International Finance conference that was held at Scripps College last spring. This conference rotates among a select group of schools, including Harvard, Berkeley, Michigan, Georgetown, and Emory. The support for these activities is made possible by generous contributions from our Board of Advisors and Associates and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. Our research efforts have resulted in articles published in outlets such as The Quarterly Journal of Economics, The Journal of Finance, The Journal of Financial Economics, The Journal of Law and Economics, The Journal of Banking and Finance, The Journal of Financial and Quantitative Analysis, The Journal of Corporate Finance, Applied Financial Economics, and Financial Management.
Because of the Robert Day gift, this year we were able to hire three new faculty members in finance: Professors Amir Barnea, Henrik Cronqvist, and Fan Yu. Although they have been here only a short time, they are already getting to know our CMC students in a number of ways. All three are working with students on FEI-sponsored research. In addition, Professor Cronqvist is teaching two sections of the research seminar, Econ 180, as well as another advanced finance elective, and is supervising FEI students on thesis projects. Professor Yu is currently teaching two sections of investments and supervising students on thesis projects. Professor Barnea comes to us most recently from the University of Texas, where he was an assistant professor. His PhD is from the University of British Columbia. He is an expert in empirical corporate finance, and has been working recently on whether the connections of a corporate board of directors influence corporate performance. He also has written about the efficacy of corporate social responsibility. Professor Cronqvist was an assistant professor at The Ohio State University, having received his PhD at the University of Chicago. He is an expert in both empirical corporate finance and behavioral finance. Professor Yu had been an associate professor at Michigan State University, having also taught at the University of California, Irvine. He received his PhD from Cornell University. He is an expert in credit risk and is interviewed elsewhere in this issue.
Our three new faculty will not only teach in the new Master’s of Finance program at the Robert Day School, but they have also enabled us to greatly expand the number of electives available to those undergraduates taking the Financial Economics Sequence. There are currently 87 such students, including 32 seniors currently enrolled. In addition to last year’s offerings in corporate finance and advanced corporate finance, we have Professor Cronqvist’s new course on advanced corporate finance, which focuses on corporate governance, and Professor Yu’s new course on derivatives.
Finally, we are very pleased to welcome new Board Associates Brian Badertscher ’96 and Nicholas Shurgot ’95 and Advisors Justin Hance ’06 and Grant Kvalheim ’78 P’12. Mr. Badertscher is a Managing Director at Bank of America Securities, which he joined in 1998 to help found the Equity Derivatives business. Mr. Shurgot is a Senior Vice President at Trinity Capital, LLC. Trinity is a boutique investment banking firm providing a wide range of financial advisory services to middle market firms, including M&A, distressed advisory and restructuring, valuations and fairness opinions and private placements of debt and equity. Mr. Hance is an Investment Analyst with Cascade Investment. Finally, Mr. Kvalheim is the retired Co-President of Barclays Capital.
Director’s Report — Fall 2007
THIS FALL, THE FEI EMBARKED ON ITS fourth year and is now firmly established as part of “CMC culture.” Since its inception, over 40 students have been associated with the FEI as Research Analysts, completing projects in conjunction with faculty members from CMC, Pomona, and CGU. The support has been made possible by the generous contributions of our Board of Advisors and Associates, and the BGI Fellowship Program, which provides support for faculty-student research on investment management topics. The research efforts have resulted in over 30 articles being published in outlets such as the Journal of Finance, Journal of Corporate Finance, Journal of Financial Economics, Journal of Law and Economics, Journal of Banking and Finance, Journal of Financial and Quantitative Analysis, Applied Financial Economics, and Financial Management. Articles from the FEI-sponsored conference on SEC Regulation were recently published in a special issue of the Journal of Corporate Finance, co-edited by Professor Janet Smith and Professor Harold Mulherin (now at the University of Georgia).
This semester, we welcomed Professor Eric Hughson to CMC and the FEI as a professor of financial economics. Professor Hughson is rapidly getting to know CMC students by teaching two sections of Investments and by supervising several FEI students on research projects. He is a nationally renowned financial economist, known best for his work on market microstructure and financial econometrics. His research has been published in high-impact outlets, including the American Economic Review, Review of Financial Studies, and the Financial Analyst Journal. A recent publication is featured in an article on page 5. We are very pleased to have him on board at CMC.
We are also pleased to welcome Robert Morris, III and Kevin Tan ’86 to the FEI Board. Mr. Morris, who lives in San Francisco, is a Retired Partner at Goldman Sachs and his son, Bremner, is a junior at CMC. Kevin Tan ’86 is the Chief Representative and Senior Vice President for The Northern Trust Company. Mr. Tan is based in Beijing, China.
Earlier in the semester, CMC announced an unprecedented gift of $200 million from alumnus and Trustee Robert Day ’65. The gift will create the Robert Day Scholars Program, a unique academic program combining CMC’s liberal arts education with state-of-the-art curricula in financial economics, accounting, and organizational leadership. The gift also creates a Master’s Program in Finance, which will be housed at CMC. With the introduction of the graduate program, CMC joins the ranks of other selective liberal arts colleges that have recognized the benefits of offering graduate level programs, including Swarthmore, Williams, Bryn Mawr, Middlebury, Oberlin, and Wesleyan. In recognition of this extraordinary gift, the department of economics will be re-organized as a school and named the Robert Day School of Economics and Finance at Claremont McKenna College.
The gift provides for additional faculty, which will augment the current selection of classes and provide students with opportunities to explore additional areas of interest. The funding also will be used to provide student scholarships and to enhance CMC’s existing career services and internship programs.
The FEI will continue to play a prominent role in the undergraduate program as well as in the new graduate program. The FEI provides critical support for databases, conferences, speaker series, faculty research stipends, student fellowships, student networking trips, and mentoring opportunities. Additionally, the FEI coordinates the student thesis project component of the Financial Economics Sequence and handles the recruiting, hiring, and management of students involved with the Student Research Analyst Program. We expect that the addition of new faculty members will enable the FEI to involve more students in research and will add to the richness of the Sequence course offerings. The Sequence, already well-entrenched at CMC, is expected to be an even more attractive option going forward, as the Day gift provides for more faculty hiring in critical areas such as mathematics and finance. In sum, we fully expect the Day gift to have a significant and positive impact on past, present, and future CMC students.
Director’s Report — Fall 2006
IT HAS BEEN GRATIFYING TO SEE THE Financial Economics Institute (FEI) become a premier program at Claremont McKenna College. The FEI, now in its third year, sponsors a curricular program (the Financial Economics Sequence) and supports data services and other research support for faculty. An integral part of the FEI is the Research Analyst Program that engages students in research projects supervised by faculty.
The Financial Economics Sequence, a series of rigorous and quantitative courses focused on finance, continues to attract student interest-- nearly 60 students have indicated their intention to complete the sequence. Employers and graduate programs have recognized the value-added from the curriculum and from the research opportunities for students. This past summer, five student interns worked full-time at the Institute on research projects with FEI affiliated faculty members from CMC, CGU, and Pomona. Twelve student research analysts have been hired to work during the 06-07 academic year. Recently published or forthcoming research from our affiliated faculty appears in such prestigious outlets as the Review of Financial Studies, Journal of Financial Economics, Journal of Law and Economics, Journal of Corporate Finance, Journal of Banking and Finance, and Financial Management.
The FEI continues to sponsor activities to enrich the educational experiences of CMC students and to renew connections with alumni. Last summer, we sponsored a reception in San Francisco, hosted by Jim McElwee (’74), for local alumni and friends of the College. In September, the FEI Speaker Series hosted Professor Zvi Bodie, The Norman and Adele Barron Professor of Management at Boston University, who spoke to over 100 guests at the Marian Miner Cook Athenaeum. Professor Bodie discussed the importance of life-cycle investing and the meaning of risk. In February, Professor Andrew W. Lo, The Harris & Harris Group Professor of Finance at the MIT Sloan School of Management and the Director of MIT's Laboratory for Financial Engineering, will speak at the Athenaeum as the spring lecturer for the FEI Speaker Series.
Future activities this year include the New York City Networking Trip which will provide 15 students with an opportunity to travel to NYC to meet with CMC alumni including top level executives at prominent firms. Companies students will visit include: Bear Stearns, Deloitte Consulting, Goldman Sachs, and Millbrook Partners.
In an effort to provide students with access to state-of-the-art databases, thanks to the financial support of our Board of Advisors, the FEI is pleased to announce the addition of a Bloomberg Terminal in the FEI laboratory. We invite you to visit our laboratory in Bauer 321 to explore this excellent data resource.
A Successful First Year for FEI — Fall 2005
AS THE NEWEST Institute at CMC, the Financial Economics Institute has had a significant impact on students during its first year in existence. The FEI introduced the Financial Economics Sequence, a carefully designed course of study that provides students with a solid educational foundation relevant to finance. In the first year, over 40 students have indicated that they plan to complete this new sequence which aims to build recognition of CMC as the premier liberal arts provider of financial economics education.
The FEI has also sponsored several activities to enrich the educational experience for CMC students. In addition to hosting a speaker series that featured two nationally prominent lecturers, Richard Thaler, the Robert P. Gwinn Professor of Behavioral Science and Economics at the University of Chicago, and Kenneth French, the Carl E. and Catherine M. Heidt Professor of Finance at the Tuck School of Business at Dartmouth College, the FEI also coordinated and funded the New York City Networking Trip, a weeklong visit to the financial capital of the world. Students on the NYC Networking Trip had the opportunity to meet senior level executives at Banc of America Securities, Bear Stearns, Goldman Sachs, KKR (Henry Kravis hosted the group), Merrill Lynch, and Onyx Capital Management.
Research activities have created additional opportunities for student involvement with the FEI. In the past year, the Institute has hired thirteen Student Research Analysts who have Henry Kravis ’65 with students during FEI’s 2005 New York City networking trip to KKR. A Successful First Year for FEI In This Issue: PAGE TWO: Brent Glover ’06 analyzes Professors Brown, Burdekin, and Weidenmier’s research paper, “Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica” PAGE THREE: Jeff Manassero ’06 reviews Professor Pension Plans: How Costly Is It?” PAGE FOUR: FEI Future Events TheExchange Exchange worked in conjunction with economics faculty members on research projects that are being developed into papers that will be published in notable journals. Students have also benefited from the Institute’s purchase of state-of-theart databases including WRDS, Compustat, CRSP, and Thomson Financial in order to facilitate and enhance research projects and senior theses. In fact, CMC is the only liberal arts college in the country to subscribe to these databases that are used by nearly every major research university.
The FEI staff is pleased with the Institute’s progress in the first year and we hope to enhance our contributions to the educational experience of CMC students. We encourage anyone interested in learning more about the FEI to contact us via phone at (909) 607-0042 or at FEI@ claremontmckenna.edu. We also invite you to come visit us in Bauer Center 321 to see the Institute’s new laboratory and library. We look forward to seeing you soon!