Baby Got WACC

For those of you who aren't business school geeks, WACC stands for Weighted Average Cost of Capital. It's the rate of return investor would require to invest in a project that represents the average risk of a company's assets. It's a major topic in corporate finance, and also one of the drier and more technical ones.

Not any more. Every year, the Columbia Business School MBA students poduce the Business Schol Follies. This year, Sir Banks-A-Lot brings a hilarious spoof of the rap song Baby Got Back in Baby Got WACC.

HT: Dealbook

Back From EFA And Back To Work

I'm back from the Eastern Finance Association (EFA) Meeting, and (as usual) have more things to do than time to do them in the last week of the semester. There are papers to grade, exams to write, classes to wrap up, and a major presentation this week that still needs a lot of work.

The EFA conference comes at an inconvenient time - right at the end of the semester. But it's still good to get away for a few days. This particular conference is always good - after a few years, you end up knowing most of the regulars involved, and it's fun catching up with old friends (and making new ones). I saw a couple of good presentations, presented some work of my own, and discussed another paper. And I even spent a few hours working with coauthors on a research project. It seems fitting, since we got the idea in the bar (after a few beers) at last year's conference. It should be done pretty quickly, since one of the coauthors goes up for tenure in a year. So there will be a lot of incentive to work fast. As my advisor was foond of saying, "I don't work well under deadlines. But without them, I don't work at all."

So, with all the stuff on my plate for this week, blogging might be light for a few days. And on that note, back to work.

At EFA In The Big Easy

I'm at the Eastern Finance Association annual meeting in New Orleans for the next few days, so blogging will be light. I presented my paper yesterday and did my discussant's duties, and meet with coauthors in about a half hour.

After that, it's off to see a few more papers and then sightseeing with some friends.


Man, I love conferences - seeing a lot of other research, interesting locations to see (some times) and catching up with old friends. It's one of the best parts of this job.

Virginia Tech Shooting

There's not much anyone can say either to the survivors of the Virginia Tech shooting or to the parents of the victims. But let's keep them in our prayers.

Then go and give your kids (and your friends) a hug.

Death By PowerPoint

Ah! Another Monday in the hopper. Only three more weeks of classes left. Can you tell I've had enough of this semester?

At least I'm getting closer to being ready for my conference. I've just about finished my quiz for Friday's class (on efficient markets and performance measurement), I've downloaded the paper I'm discussing, and I'm about halfway through with my presentation.

One of the things I've learned about conference presentations is "less is more." In this conference, we have about 15-20 minutes for presentations, and I go last out of 4 papers in my session. So, if history repeats itself, someone before me (either a presenter or a discussant) will go WAY over time. So, I'll limit my presentation to 8-9 slides at most, and no tables (only bullet points for my results).

On that note, here's a short and very funny video on how NOT to do a Powerpoint presentation (HT: Presentation Zen).

Sunday Link Dump - More on PE and Hedge Funds

The semester continues its march to the last day of classes (I have a total of 7 teaching days left until finals). So, I'm in my office on a Sunday getting ready for the final push. I leave for the Eastern Finance Association Meetings in New Orleans Wednesday after class, so I have to get a bit ahead of things (I still haven't written my quiz for my sub, or finished my presentation, or even started on my discussants comments).

So while I toil away, here are three links (again, on hedge funds and PE firms - I seem to be in a rut) to keep you busy:

All About Alpha interviews Tom Schneeweis of UMASS on hedge funds, alpha, and risk. Here's the money quote: "I really do believe that most hedge fund managers want to believe they are wizards. When in reality, all they are doing is accepting certain types of risk. "

According to this Fortune magazine article on the distribution of PE firms, the majority of PE funds are well under$1 Billion in size - in fact, the average fund (once the top ten are excluded) has an average size of $180 million, if you don't count the top 10 firms.

Here's an overview of hedge funds (in PDF format), compliments of Michael Covel.

Enough blogging - my grading beckons.

Questions From Ph.D. Students - Present and Future

I started Financial Rounds over two years ago mostly as an experiment, and as a way to keep track of all the good stuff I came across while wasting time on the Net. It's been fun, has made me some good friends, has helped me keep up to date with the "real" world", and has given me some laughs.

But one unexpected and very pleasant outcome has been the number of emails I've gotten from students considering a Ph.D in either finance or economics. At last count, I've had over 40 this last year alone. Some of them found this site through google, searches that led them to one of my posts about academic salaries, what's involved in getting a Ph.D., or what a professor does all day. Others found it through links from related websites.

However they got here, it's been a pleasure answering questions about the graduate admission process, what it takes to succeed in a Finance Ph.D. program, job prospects, and so on. One of the best parts of being an academic is the chance to leave a legacy. Having students go on to become professors themselves is a pretty cool way to do that. As a professor, I've had between one and two of my own students a each year eventually go on to a doctoral program, and it's been surprisingly fun to play a small part (through this websits) in other students' academic careers as well.

If you've gotten into grad school or are seriously considering it, and anything I've said on the blog (or in private emails) has been helpful, drop me a line and let me know where you're at (I'll keep things confidential unless explicitly instructed otherwise) . And I hope that you'll keep in touch. You're not exactly "my" students, but I'd be interested to see how things come out.

And who knows - I might get more fodder for blog posts.

Thursday Link Dump

The last couple of posts have been humorous (or at least, in some cases, tasteless), so I guess it's time for a link dump.

Private Equity & Hedge Funds
First off, there are a troika of pieces on PE-bond relationships: Accrued Interest breaks down the implications of takeovers for bondholders, Floyd Norris at NY Times discusses how debt is used to fund payouts in PE deals, and Marketwatch relates the woes of bondholders in LBOs.

Via FT Alphaville: activist hedge funds are using the Web to convince shareholders to their way of thinking.

According to this Financial Times piece, Hedge Funds are taking positions in bankrupt firms.

Curious about who the big dogs are in the PE worked? LBO wire reports.

Investments
Felix Salmon discusses "Debt arbitrage". He's been writing some great pieces lately - time to update my links.

Mark Hurlbert at presents the latest insider buy/sell ratios - they're still mildly bullish.

New York Magazine has a (fairly typical) piece on how top executives are making TOOOO MUUUCCCHHH MONEY (both coming and going).

MarketBeat reports on "accelerated share repurchases.

Barry Ritholtz at The Big Picture presents a bit of a history lesson and examines Historical Bear Market Contractions

CXO Advisory Group reports on some interesting pieces. One describes historical patterns of the value premium (the additional return earned by high book/market firms over their low book/market peers), and another examines factor models and finds that "A model combining market return, liquidity and coskewness ... explains individual stock returns in 35 out of 40 years.

Humor
Joe Carter has his latest installment of the Yak Shaving Razor series up at Evangelical Outpost.

Craig Newmark links to a corporate finance version of the old "you have two cows" joke.

Enough blogging - I've cleared out my bloglines account, and it's time to get back to something productive.

Walter The Farting Dog

Caution - tasteless, scatological, and childish humor ahead.

Like most six to eight year old kids, the Unknown Son and Unknown Daughter are fascinated with all things gross. For Unknown Son, the natural fascination of little boys with gross things was compounded by some of his medical issues: when he had his surgery to remove his tumor, it messed up his intestines for quite a while. And in addition, it turns out he had an undiagnosed allergy to dairy products. Without being too indelicate, let's just say that the combination it gave him the ability to really clear out a room.

So, they were really excited when I brought home a "special" book from the library for last night's bedtime story: Walter the Farting Dog: Trouble At the Yard Sale . Walter is a dog with a flatulence problem. There are over a half dozen books chronicling his escapades. And they're guraranteed kid pleasers. As one of the reviewers said,

We hold this truth to be self-evident: farting makes kids laugh.

Of course, the Unknown Wife wasn't nearly as pleased. But I am a hero with the kids for at least a day or two (and yes, I have another Walter book for tonight's story).

Seminar Bingo For Ph.D. students.

If you're a Ph.D. student (or faculty member) and are bored in a seminar, here's something to keep you busy


Compliments of PhdComics. It's a good thing I hadn't found their site when I was in grad school or I would have wasted even more time.