Sunday, April 30, 2006

An Update on House Hunting

As I mentioned in a previous post, we visited our extended families' area for the Easter holiday. We also spent a day of house shopping in the new college town (we can do both, since the new job's only 70 miles from the Unknown In-Laws' house). There's a little bit of sticker shock (it'll cost about $100k more than our current home, and the new mortgage will be at a rate that's about 1% higher than the old one to boot), but that's o.k. -- it's only money, and that's what it's for.

At least we're not paying more for nothing - although the prices are quite a bit higher than our current house, the area seems like it has a lot of advantages relative to our current lodgings. From what we've gleaned from our realtor and my colleagues-to-be, the area is extremely family oriented. Almost all the houses we looked at were in developments with loads of children around. In addition, there are lots of programs for the munchkins (summer sports leagues, library activites, etc...). And even better, all the houses we looked at are within 4 miles of the campus (versus a 50 minute commute in my present job). So I'll pick up several hours a week in commute-time savings.

The Unknown wife and I stopped by the new Unknown University while we were there to deal with some administrivial issues like employee benefits. While there, she got to meet quite a few of my new colleagues. It's still the honeymoon phase, so everyone's on their best behavior (with one exception, who's never on his good behavior, but he's a good sort, and fun to have around). She thought they seemed like a nice bunch, and was impressed that they regularly do Friday happy hour, with spouses invited. So once we find a babysitter, we'll be set.

As things unfold, I'll keep you posted. After all, what's a blog for if not to share the mundane details of our lives?

Saturday, April 29, 2006

Adverse Selection (or "Why you can never buy a decent used car")

In 1966, Georgee Akerlof wrote a paper titled "The Market For Lemons", which was published in the Quarterly Journal of Economics in 1970 and eventually led to his getting the Nobel Prize. The paper demonstrates how differences in information between buyers and sellers can cause problems in a market.

This concept (known as "asymmetric information") has had far-reaching applications. Just a few of the areas it where it shows up include the markets for goods, the problems faced by lenders or insurers, and the effects of securities issuances or dividend changes.

Tim Harford (author of The Undercover Economist) has a nice piece that explains the basics of this perspective in Slate Magazine titled Why you can never buy a decent used car.

In addition, here's an essay Akerlof wrote with some refletions on writing and eventually getting the article published.

Friday, April 28, 2006

A History of Wall Street and the Stock Markets (from

Yeah, yeah, it's the end of the semester, and I haven't been blogging too much. Instead, as i find things I like, I tag them for later use. Unfortunately, I looked at my file of things to blog on, and it was overflowing. So, it's time to move a few things from the "Saved" file to the blog.

Jim Mahar recently provided a link to this excellent History of Wall Street and the Stock Markets. from
Once upon a time, before New York City was a city, there really was a wall. It was built in 1644, on the lower end of Manhattan "Island" by the

Dutch to protect against British attacks. Years later, the defensive wall was gone, but the road alongside remained and was, of course, called Wall Street. We think of Wall Street as the financial center of the world, but it hasn't always been this way....

It's easily readable, and has a lot of good background. I'd even recommend it for a high school history class.

Wednesday, April 26, 2006

Forecast For Blogging: Light

Lately, my blogging's been a bit light. It will likely continue that way for the next few days

I've got exams to grade (and a some new ones to write), a couple of mildly overdue referee reports to bang out, a deposition to go to tomorrow (I do a spot of expert witness work on the side), a house to put on the market, and the usual end-of-semester madness to deal with.

Bear with me - in a week or so, I should be resuming normal bloggery. Until then, don't forget me. I'll probably post a few things, but only as time permits. After all, it's not like this is my day job.

Monday, April 24, 2006

Thoughts on Conferences

I just got back from a somewhat smallish academic conference (about 100-150 or so papers presented over 2 1/2 days). A couple of things struck me:

First, if you choose a smaller conference (like the Eastern Finance Association or Southern Finance Association) meeting and attend regularly (i.e. 2 out of every three years), it doesn't take long for you to get to know a good percentage of the regular attenders. To do this, all you have to do is (in addition to presenting a paper or discussing one) go to the receptions and talk to a couple of new people every night.

Second, because it's such a small community, information travels very quickly at conferences. The first day of the conference, I mentioned to a handful of people that I was changing schools. By the end of the conference, the majority of the people I talked with were congratulating me.

Third, conferences are good places to start projects. There were two fellows I knew in passing (both are colleagues of a classmate of mine from grad school). One does investments and derivatives, one does corporate, and one is pretty eclectic. By the third beer, we had a rough sketch of an idea that we'll start on this summer.

Finally, I'm never going to send more than two papers to a conference again (in a fit of insanity, I submitted three this time). You might think that sending this many papers ensures that you'll have at least ONE paper on the program. Instead, all it does is ensure that you'll be running around to cover all your sessions - in other words, if you submit "N" papers to a conference, the probability of ALL of them being accepted is increasing in N.

Ah well, time to go spread some knowledge. Only 2 weeks of classes left and then finals. Woo Hoo!

Sunday, April 23, 2006

Phony Doctor Gives Free Breast Exams

Sometimes truth is stranger than fiction:
MIAMI (Reuters) - A 76-year-old man claiming to be a doctor went door-to-door in a Florida neighborhood offering free breast exams, and was charged with sexually assaulting two women who accepted the offer, police said on Thursday.
Click here for the whole thing (from Yahoo! News).

Tuesday, April 18, 2006

This Week's Carnival Of The Capitalists

This week's COTC is up at Free Money Finance. As usual, here are my picks of the week:
In Be a Financial Advisor, Consumerism Commentary points out a Money Magazine artticle that ranks Financial Advisor as the third most desirable job. Just remember- college professor ranks 2nd...

Searchlight Crusade goes through some issues relating to Removing Private Mortgage Insurance (PMI)

Young and Broke has an interesting post that describes Potter Economics (the use of Economics in Harry Potter).
There are more than three dozen posts this week at then COTC with a lot of variety, so look around. As always, tastes (and needs) differ, so pieces I skip right by might be just what you need.

Out Of The Closet

Sorry for not posting much the last week or so - it's been a hectic time, what with a conference to prepare for, the end of the semester, and getting the house ready to put on the market. And a trip to the Unknown ancestral home (i.e. a 250 mile drive drive to our families' homes for Easter).

It's official now - I told my current department chair last week that I'm leaving at the end of the semester. Within a day, 3/4 of the people in the building knew. People who talk about the speed of light being the upper limit in this universe have it wrong -- it's information in academia that travels faster than anything else

Academia's unlike almost every other profession in the way people leave jobs. In the "real" world, people are often fired and told to immediately clean out their desk. In academia, by contrast, people typically know they're leaving (as do those around them) far in advance. It can be very awkward if you're not leaving by choice (i.e. because you failed to make tenure) - you have to see the people who voted against you in the hallway for the next few months (and sometimes for over a year). But in this case, I'm leaving by MY choice rather than by theirs, so there's a different dynamic. Surprisingly, people act like I'll be missed, and have told me often about the ways I've contributed to the College, the students, and the department. So all in all, it's been pretty good experience so far.

As a result of my being "out of the closet", I can now do things that I think make sense (and avoid the things that don't) without worrying about consequences. For example, I get to avoid all senseless meetings (which are most of them, IMO) from now until the end of the semester - starting with today's School of Business faculty meeting. I'll be home torturing data instead. In addition, I can give a final exam to my night class on the last day of classes rather than wait for finals week. They're small things, but I look at them as some of the little perks of leaving.

Tuesday, April 11, 2006

Can Mutual Fund "Stars" Really Pick Stocks?

Abnormal Returns provides a link to a very interesting paper by Kosowski, Timmerman, Wermers, and White (forthcoming in the Journal of Finance, titled Can Mutual Fund "Stars" Really Pick Stocks? New Evidence from a Bootstrap Analysis. It's got some pretty high level statistics in it, so if you're not into that you might want to skip it. However, AR summarizes the paper's findings nicely:
  1. There are fund managers that demonstrate (beyond luck) positive alphas;
  2. As more funds have entered the marketplace it has become more difficult to identify strong managers;
  3. Top manager performance persists over time.
The third finding is interesting, because it dovetails with this recent paper (which I blogged on here). It gives evidence that there are also individuals who earn persistent abnormal returns.

You've gotta love the Web - I have a lot more meterial for class these days. I'm teaching about market efficiency next week, so these papers will definitely be on the docket for discussion.

This Week's Carnival Of The Capitalists

This week's COTC is up at Business Opportunities Weblog. There were quite a few posts this week, but three particularly caught my eye:
Big Cajun Man shares a story his father told him in Advice: Best Financial Advice Ever Given. I'm a big fan of teaching through stories, and Cajun's got a good one.

Dan Melson (as usual) has some good info. On Searchlight Crusade, he asks (and answers) the question "“What is this property really worth?"”

On The Real Returns, Moneywise examines balanced/hybrid funds. They're an interesting option, and worth looking at.
There's lots more, so be sure to browse around.

Thursday, April 06, 2006

How Financial Markets React to Shocks (from

For some reason, I've been getting a number of questions lately on the effect of 9-11 on markets. And then, just the other day, I see this analysis on It looks at a study titled "Updating Expectations: An Analysis of Post-9/11 Returns", done by
Jarl Kallberg and Crocker H. Liu (both at New York University) and Paolo Pasquariello (at the University of Michigan).

The study examines how the stock prices of Real Estate Investment Trusts (REITS) with holdings in New York reacted to 9-11. It's an interesting question, because it's not immediately clear before the fact whether these REITS would benefit from the removal of rental units from the market (thereby driving up rental rates), or would be hurt by a possible NYC economic slowdown. Here's what they found:

  1. REIT stock prices initially went up significantly. Prices of REITS with exposure to the NYC market outperformed a broader REIT index by about 4% ion the first day that the market reopened after 9-11.
  2. However, when the increased operating performance didn't materialize, insiders of these REITS were the first to notice, and they "voted with their feet" (i.e. they started selling off their shares.
  3. Next, analysts started revising their forecasts of these firms downwards.
  4. Only later did the stock price of the REITS catch up with the lowered expectations of the more informed insiders and analysts.
Click here for a PDF version of the paper.

A very cool piece, both because of the way it shows how markets react to an unexpected shock, and because it highlights the ways different parties process information. It would be a great piece to discuss in a class module on market efficiency. Luckily, I teach that section next week.

Yak Shaving Razor #47 (From the Evangelical Outpost)

Joe Carter at Evangelical Outpost has his latest installment of his Yak Shaving Razor series (#47) up. I don't know where he gets these things, but they're often useful.

Beauty and the Fattened Wallet (via the New York Times)

Do good-looking have as many advantages in the job market as we've always heard? New evidence seems to show that it's not as clear as we thought.

Markus M. Mobius of Harvardand Tanya S. Rosenblat of Wesleyan University conducted an experiment on the "beauty premium". Their study, "Why Beauty Matters," was published in the March 2006 American Economic Review. A prepublication version can be found here. The bottom line is that beautiful people are perceived as more competent, and also have more self-confidence. But, on the downside, they are expected to contribute more and are held to higher expectations.

Hal Varian has some thoughts on the study in his New York Times column "Beauty And The Fattened Wallet":
So perhaps beauty is a two-edged sword. If you are beautiful, people expect you to be better than ordinary-looking people, even in mundane tasks like solving mazes. But when good-looking people do not perform as expected, others feel let down. The rest of us can take solace in the fact that it is easier for us to meet expectations.
So, being physically attractive is helpful in getting you in the door, but has downsides once you're in.

I try my best to lower people's expectations of my performance as much as possible, and I've usually been successful at getting people to "misunderestimate" me. Now I know part of the reason why.

Darn - I though it was just because I was shrewd...

Wednesday, April 05, 2006

Monday, April 03, 2006

This Week's Carnival Of The Capitalists

This week's COTC is up at Jotzel. It's a bit different this time - because of the way the site is set up, you can vote for your favorite piece. Here are some of this week's posts that caught my eye:
In two related posts, Dan Melson at Searchlight Crusade and Barry Ritholtz at The Big Picture discuss the housing bubble.

Jeff Cornwall at Entrepreneurial Mind reminds us that VCs aren't long-term investors

Pacesetter Motgage tells us how to stop credit bureaus from selling your information

Uncle Bill looks into the past and talks about Warrren Buffet's Investing Strategy 25 years ago

Pacesetter Motgage goes into how to stop credit bureaus from selling your information

Buying a house while selling another? You may want to read Nickel's piece on the ins and outs of bridge loans.
As always, look around if you have the time. My interests are different than yours (as is my background). There's always lots of good things at a Carnival, and a piece that didn't do anything for me might be just what you need. Who knows -- you might find a new blog to read.

Saturday, April 01, 2006

Spring Cleaning Before Listing The House

Since I'll be starting in a new position at a new school in the fall, we're starting the process of selling our house (and buying another). Some of the "pre-listing" things we have to do involve putting a bit of paint here and there, putting down new linoleum in the bathroom to cover the stains, etc...

But the rest involves getting rid of as much clutter as we can so the house looks neater and is easier to tidy up if we hear that we have a showing on short notice. Getting rid of the clutter also makes the house (and the closets) look a lot larger.

Unfortunately, we have two children (ages 5 & 7), and the Unknown Wife doesn't like to throw stuff away in the normal course of things. So, this weekend we're going through each kid's room for spring cleaning & pre-move packing. If they play with a toy often, it stays out. If it's important to them but they use it infrequently, it gets boxed up, labeled, and put in the basement. The rest of the stuff gets either thrown out or donated to the local thrift store.

We're doing a similar dance with clothing, except that winter things get packed away. My goal is that we can eliminate (either temporarily to the basement or permanently) between half and 2/3 of their stuff.

So far, we've gone through the Unknown Son's room, and it only took about an hour. It's amazing how much more roomy it looks with all the unneeded stuff out of the way. The Unknown Daughter, however, is a bit of a pack rat (and she's figured out that she can hide stuff under the bed). So it'll probably take a couple of hours to go through her room, and the Unknown Wife and I will end up arguing about things a lot more (I'll be on the side of tossing things out, and the Unknown Wife on the side of keeping them because they're "special").

Ain't moving grand? They say two moves is as good as a fire as far as getting rid of things.