15 Laterals and A Touchdown

Now this is cool - on the last play of the game, Trinity College makes 15 laterals before scoring!

update: I've been corrected by one of my readers (thanks, Bob) - it was Trinity University, not Trinity College.

How To Keep Your Paper Within Page Limits

Once again, PhdComics nails it. My students are starting to hand in early drafts of their projects for my securities analysis class. I think I'll staple this to the back with my comments when I return them.

Think it'll help?

Three Collections of Advice About The Academic Finance Job Market

I recently came across two very good guides to the academic finance job market in a journal called Financial Decisions (formerly the Journal of Financial and Strategic Decisions).

The first one, titled "The Academic Job Market In Finance: A Rookie's Guide" is by Timothy Falcon Crack and Alex Butler. It's floated around the Internet for a while, and it's a pretty thorough guide to the job market for candidates at research-oriented schools. In addition to providing a lot of very helpful tips, it also lays out a timeline that would be useful for anyone just starting out graduate school - the choices you make in the first year or two are very important to your eventual job search.
note: they have a short update with a few additional pieces of advice here.

The second piece, by Delbert Goff and Stephen Huffman, is titled "The Finance Academic Job Search: What your Advisor Might Not Be Telling You". It's geared more towards the market for jobs at schools that are more teaching oriented. It has a very good list of questions to ask when you interview.

I wish I'd found these before FMA - they could have helped a few of the candidates we interviewed for our position.

Reflections on Interviewing at The FMA Meeting

Now that I've been back from the FMAs for about a week, I finally have time to put some thoughts together about the experience. Although I've been in the job candidate's seat a number of times, this was my first time being on the "hiring committee" side of the interviewing table, and it was an interesting experience, to say the least. Here are a few thoughts, in no particular order (like many of my thoughts, but let's not go there):

1. There was a huge (and noticeable) variation in the amount of preparation candidates had done on my school. If they didn't know anything about the school other than the location, it signalled a general lack of interest on their part (and resulted in a lack of interest on ours).
   
2. A surprising number of candidates did a very poor job of what I call "setting the table" for their research. By that, I mean the anecdotal part of showing me why I should give a rat's hiney about their topic. As an example, consider a candidate researching the effect of syndicate composition on the outcome of an IPO: A bad candidate would jump right into their model and/or hypotheses, while a good candidate might first talk about a recent underwriting syndicate put together by Goldman, and what some of the salient facts illustrated about their topic.
   
3. It's impressive when you can site literature to buttress your arguments and do it smoothly. It shows you have a good grasp on your literature. It's even better when you can bring it back to the big picture.
   
4. I found out that I really like asking questions about factors that the candidate hadn't considered in their tests (for example, if they were examining some aspect of merger bid premiums, I'd ask how the composition of the institutions (transient vs. indexers) holding target shares might affect their analysis). My main interest wouldn't be their specific answer, but rather how they approach the question. Again, if they can link it back to important prior research, all the better.
   
5. Here are some f the things that made candidates seem less attractive: not knowing their topic (or not caring) well enough to show me how it fits into things (see above), not taking care in answering questions (See above again), not at least making eye contact with everyone in the room (even if one is the dominant interviewer, we all count), and not having any good questions to ask US - it shows you're interested and know at least a bit about our institution. Make sure tehy're not dumb ones.
   
6. We had one or two candidates that were extremely sharp - they were prepared, articulate, passionate, interpersonally gifted, and had great dissertations that they really had a grasp of. Of course, we have NO chance of actually hiring these people (we're a bit under the market salary. But at least they serve as a benchmark.
7. The process can be stressful for the candidates, and stultifyingly boring for the interviewers. Regardless of which side of the table you're on, if you don't take careful notes, the interviews quickly run together.
   
8. One candidate had 35 interviews! I have no idea how they either prepared for all of them or how they survived the stress. On a related note, this candidate was 10 minutes late for OUR interview. So, they had probably gone past the optimal number. And we're not sure we want to get into a "multiple bidder" situation. So, thanks but no thanks.
9. We've met as a group since coming back, and have a short list of candidates we'd like to call for fly-outs. But before we can invite them, we have to clear the hurdle of our affirmative action office. And they're a picky and verrrry slow group. So, I suspect we'll get some sand thrown in the gears shortly, and we'll have to wait a while longer before the campus visits.
   
10. You run into a surprising number of candidates (and their professors) at the cocktail party and at the bar. This is a good place to find out if they're the sort of people you want as colleagues. (the well known "soft" information). If they can loosen up a bit (but not too much), it's a plus. Even better if they've been reading any interesting books lately.
    

I'll post more on the process as it continues. Stay tuned

The Financial Rounds FAQ

Note: Updated 10/25/2007

I looked up the other day and realized that I've been running Financial Rounds for over 7 1/2 years now (and have exceeded 400,000 hits and 1,000 subscribers). That makes me pretty small fry in the bigger blogosphere, but I'm very happy with it. If you've been reading for a while, you've picked up a lot of info on who I am, my background, and so on. But in case you're new to Financial Rounds, this will hopefully answer some of the questions you may have. So, welcome to the Financial Rounds FAQ page -- I'll update it periodically as time goes on. If you want to go back to the main page, you can click here. And if you want to contact me, you can send me emails at unknownprofessor-at-hotmail-dot-com.

When did you start the blog, and why?
I started blogging in February of 2005 mostly as a way to keep track of all the random Internet stuff I come across (like many nerds, I spend FAR too much time online). Originally, I thought it would be a good way to help me remember some of the interesting Internet resources (and bizarrely humorous stuff) I though might be useful in the classes I teach. And of course, once I started, it's just become a habit.

Why blog anonymously, and why the name "The Unknown Professor"?
I try to keep my blogging identity separate from my work one. So I thought it would be best to blog under a pseudonym. There's always the possibility that some of my colleagues might be offended by something I've written, or they might be afraid that I'll use the blog to air my department's dirty laundry. And that's always a temptation -- in any setting whee there are people involved, there will be stupidity, lack of common sense, or just plain nastiness (present company included). As the members of a group of guys I used to meet for breakfast with every Saturday would say, "We are not an impressive species".

So, rather than take the chance, I decided to play it safe. But it makes things interesting -- not knowing my identity forces people to evaluate what I say solely on its own merits (for all you know, I'm really a dog). In addition, I have to be careful not to reveal too many details on my research or my school.

My pseudonym comes from the late-70's comic known as the Unknown Comic, who did his incredibly schlocky comedy routine with a paper bag over his head. I guess that means at some point, I'll have to upload a picture of me at the blackboard with a paper bag over my head.

What's your background?
I received a Ph.D. in finance sometime in the 1990s from a pretty good (not top-tier, but pretty solid) university (FYI - for those of you who are wondering what's involved in getting a Ph.D., click here). Since then, I've been a college professor at a number of universities (including one stint where I was a visiting professor at a pretty good research school for a couple of years). I've published research in a number of areas (some are kind of accounting-ish, but most are squarely in the midstream of finance), and at one time or another I've taught classes on just about everything but derivatives and multinational finance. I'm interested in most finance topics (and a fair number of accounting ones too), and blogging helps keep me aware of a broader set of things that I otherwise might.

What topics do you blog about?
I pretty much write about whatever strikes my fancy. However, there are a couple of areas that I keep coming back to. I'd guess about half my posts are related to either Finance or Economics, and are usually prompted by things I come across in the news. For finance topics, I mostly comment on corporate finance and investment topics (after all, they're the topics I teach and do research on for the most part). I regularly discuss the trials, tribulations, joys, and general weirdness of the academic life. And of course, there's always my family: the Unknown Wife, Son, and Daughter (and others).

How about some personal information?
I'm middle-aged, been married to the same woman for pretty much forever, and have two great kids: the Unknown Baby Boy (age 2) and the Unknown Daughter (age 10). My formative years were spent in a blue-collar, northeast USA mill town where much of the town had immigrated from the same small Northern Italian village in the early 1900s. Many of my older relatives (and there were a lot, since I'm Italian on my father's side) spoke fluent Italian, and one of my relatives actually made his own salami and cured it in his basement (he may have actually caused a trichinosis epidemic in my hometown, and I may have caught it, but that's a story for another day).

Most of my later perspective on life comes from three things: I became a born-again Christian in my late teens, and have been fortunate enough to be surrounded by many wonderful, mature older folks who have been willing to kick my hiney when it's needed (and that occurs much more often than it should). I've been married to the Unknown Wife since just about forever, and she has most of the qualities I lack - tact, grace, and a great sense of what people are thinking and feeling. Were it not for her, I wouldn't even have the minimal levels of people skills I currently have (see Italian immigrant mill-town upbringing above). And finally, I had a child that suffered through a long battle with cancer before passing away a few years ago.

What are your favorite blogs:
I read FAR too many blogs, and definitely need to cull my feed reader. But there are some constant favorites: In the Econonomics area, I read Marginal Revolution, Econlog, Gregg Mankiw, and Freakonomics pretty much daily. For academic-related finance, Jim Mahar's FinanceProfessor.com far and away leads a relatively small pack. For non-academic finance, I regularly read Abnormal Returns and. And as for others, there's Protein Wisdom, Evangelical Outpost, and Professorbainbridge.com

Do you give investment advice (or stock picks)?
If you mean do I give stock recommendations, the answer is definitely no. I often comment on particular companies or investment vehicles, but mostly as a means to show how some goings on or other illustrates a larger finance or economics point. After all, I'm a believer that markets are efficient (or sufficiently close enough that you and I can't beat them consistently). So, giving stock picks would be inconsistent.

What makes your blog different from all the rest?
Other than Jim Mahar's FinanceProfessor.com, I'm still one of a relatively small group of bloggers who look at the finance world from the perspective of a finance academic. So, I'm naturally skeptical, and can comment on things from the perspective of what academic research has to say on the topic of the day (at least, when it has something to say). I also have a fairly good sense of humor and don't take myself too seriously (having been married to the Unknown Wife for 16 years has cured me of that). Finally, I may be one of the few bloggers that provide a window into the life of a finance professor.

Do you want to trade links?
While I occasionally find myself linkslutting, it's usually because I think something I've written might be interesting to other bloggers. I'm not big on link exchanges. If you think Financial Rounds is worth linking to, please do - I appreciate the traffic. Likewise, if you think your blog might be of interest to my readers, send me an email (unknownprofessor-at-hotmail-dot-com) and I'll be glad to take a look at it. If I think it'll be of interest to my readers (or if it strikes my fancy), I'll be glad to link to it without expecting a reciprocal link. Likewise if you've either written or come across something you think I might find interesting, send it along. Many of my favorite blogs were initially recommended by some of my readers.

I'm thinking of getting a Ph.D in Finance. Can I email you some questions?
Absolutely! I get about a dozen questions a month in that vein. It's one of the surprising parts of the blogging experience - a lot of my readers have questions about the life of a finance professor, grad school, research, and other related topics. There's a surprising lack of info out there that's available in an easily digestible form. So ask away. My advice is free, and usually fairly priced.

If you have any other questions, please send them in to (just remove the hyphens) unknownprofessor-at-hotmail-dot-com.

Alumni Networks Matter

Ever wonder how much impact a school's alumni network has on career success? In the world of Wall Street, apparently quite a lot. In this article, DealBook reports on the school connections of major Wall Times figures. Apparently, there's a lot of "school clusters".

If you want to see a pretty cool visual of the relationships, click here (it comes up small, but click on the image to enlarge it).

You could interpret the relationships as anecdotal evidence that networks matter. But I think it's just as likely that these top schools are the major producers of future "masters of the universe". So it's not surprising to see a lot of big form Wharton (for one example) or Harvard (for another).

The "Shotgun" Approach

Recently, I made a short post about a rejection we got from a journal, and noted that we'd "make a few changes and send it out to another journal". Robert Jensen (emeritus professor of accounting at Trinity University, and one of the earliest academic bloggers) picked up on this and made some very insightful comments on the research "Shotgun approach"

Most academics still actively seeking publication in research journals are playing the same game.

Think of each shotgun pellet as a research paper which in modern times is generally a co-authored paper that gives rise to more pellets (i.e., more papers) loaded into the shotgun shell. The "Shotgun Game" (my definition) is analogous to standing at one end of a football field and firing a 12-gage into the air while hoping that one or more of the tiny pellets will fall down on a target beyond the opposite goal line. At first the target is a very small Tier 1 academic journal target. There may even be several of small targets of about the same Tier 1 small size, especially when foreign journals are allowed to be targets. The game may be replayed several times with substituted Tier 1 targets until the player and/or the referees grow weary of repeated plays at the Tier 1 level. Then the player moves up to Tier 2 journals that have targets twice the size of Tier 1 journals and are, accordingly, easier (not necessarily easy) to hit. Then there are Tier 3 journals, Tier 4 journals, and on and on. Ultimately there are conference proceedings with targets that take up half a football field and are easy to hit even when played by blind researchers. Each shell fired is reloaded with pellets that missed the targets on earlier plays of the game.

Read the whole thing here (it's about a quarter of the way down, and the the easiest way to find it is to search on the page for Unknown Professor).

His comments, and those of the commenters who chime in, are pretty much on target. Unfortunately, Professor Jensen makes one mistake: he thinks I'm now tenured (I'm not yet). At my school, both the number and the quality of my publications count (unfortunately, they place more weight on numbers than quality). So, my interests are best served by getting stuff out quickly, particularly since I will likely go up for tenure in the next couple of years.

I admit, this strategy imposes some costs on the profession as a whole (particularly for the poor referees that have to read the stuff I submit). And the work I'm submitting isn't terrible - it's just admittedly not up to the standards I'd like to maintain in a perfect world. Were I aiming for tenure at a "top" research school, it definitely wouldn't be an optimal strategy.

However, here at Unknown University, quality counts within the department (quality meaning publications in either first or high second-tier journals), but numbers count within the larger college and with the Dean (yes, a Dean is someone who can't read but can count). And while Unknown Son was undergoing cancer treatment, I simply didn't have the energy to work on "big" projects. So, I started a lot of smaller things. They're not great, but they'll get published somewhere, and my dean will have things to count.

But I do hope to kick up my research in terms of quality (and I'll have to to get the tenure vote of at least one of the senior faculty in my department). I currently have three revise-and-resubmits that should all be resubmitted within the next month (unfortunately, all at lower-tier journals). Once these are off my desk, I'll have cleared out the "old" material from my research folder, and can start working on the higher-impact stuff.

We've gotten pretty strong positive signals from the editors on two of the three. So if those two hit, I could end up having 5 acceptances in my first eighteen months at the new school. Granted, they're mostly at lower-tier journals, it does give me some cover while I send out some pieces to higher-tier journals.

I agree wholeheartedly Professor Jensen that a great deal of research that gets done would be FAR better served posted on blogs or some Wiki-style forum. But the school I'm at is the one I plan on staying at (it's one of the three target schools I had when I graduated, and it took me eight years and 3 moves post-Ph.D to get here). So, I bite my lip and do what I have to to get tenure.

Nontenured faculty (particularly at lower-tier schools) have a difficult task that involves balancing two competing approaches: the "Shotgun" approach is unfortunately the optimal one for minimizing the risk of not getting tenure, and the "high quality" one (do only research that answers big questions and has a high probability of ending up in "top" journals) that most benefits the profession and makes it likely that they'll eventually end up at top research schools.

But no one ever said it would be easy.

Myerson, Maskin, and Hurwicz Win Nobel Economics Prize

Once again, I guessed wrong - Fama once again didn't get the nod. Instead, the prize went to three Americans who were instrumental in developing and forwarding the economics sub-field know as "mechanism design". Congratulations to Leonid Hurwicz of the U of Minnesota, Roger Myerson of the U of Chicago, and Eric S. Maskin, a professor at the Institute for Advanced Study in Princeton.
For more about them, read this piece in the NYTimes Online.

If I keep guessing Fama, I should eventually be right (as long as he stays healthy).

Getting Ready For The FMA

It's that time of year when a good part of the academic finance community is madly preparing for the Financial Management Association annual meeting. This year, it's not nearly as hectic for me as usual. I'm participating in a panel discussion and have one committee breakfast I have to attend, so there's not that much to prepare. In contrast, one year in a fit of temporary insanity I submitted three papers, of which all three were accepted. That seems to be a general rule - submit one paper and you often get rejected. Submit 2 or more and they all get accepted so you run around like you're on sugar and speed. At the same conference, I somehow ended up agreeing to discuss two papers.

Never. Again.

While I'm not presenting much this time around, my school is (unfortunately) interviewing for an assistant professor position (and in case you're wondering, I'm not accepting applications sent to the blog). So I get to spend the better part of 2 1/2 days sitting in a hotel room with two or three of my colleagues listening to one candidate after another tell us about their dissertations.

Since I'm at the other side of the table this time, there's not any pressure on me. But in exchange, there's the distinct possibility of extreme, mind-numbing boredom. Given all the b.s. I spread around when I was on the market the last few times, I guess this is just karma coming back to bite me on the butt.

So if you're a regular reader and you'll be there at the conference, send me an email and maybe we can have a drink. I may need it after interviewing.

Another Rejection Letter (Sniff!)

Just got aother rejection from a journal. I'm not all that surprised, because it was a pretty good (I think it was ranked #5 in it's area) journal and it was a stretch to send this piece there. But you never know - sometimes you catch a referee (and editor) in the right frame of mind.

Oh well, this just means we make a few changes and send it back out to another journal. I used to panic about this stuff, but I now know that most papers (if they're decently well done) eventually find a home somewhere.

I felt pretty good a couple of weeks back, since I had five pieces under review. But one of them got accepted (darn!) another came back with a revise-and-resubmit, and this one got rejected. So, I'm no longer "Mungo Compliant" - I fall short of the "three paers under review" standard. So it's time to get the R&R's off my desk and back in an editor's hands.

I have five other projects in various stages (two of them are actually somewhat completed working papers), but until they're submitted to a journal somewhere, they're nothing but vaporware.

So it's back to the academic salt mines...

Prediction Markets and The Nobel Prize in Economics

The lists of likely Nobel Economics Prize winners have started. I chose Eugene Fama for last year's prize based on his early work supporting market efficiency and his more recent work examining weaknesses in the tradional Capital Asset Pricing Model (CAPM). You've just gotta love an academic with the stones to turn his back on his career-making earlier work when he finds new evidence that contradicts it.

But last year, I came up with bupkes/nada/diddly. So this time I'll stick with the same hand.

In case you're interested, InTrade has opened trading in the Nobel Prize contracts. Fama's currently leading the pack in the econ trading, but it's still early.

HT: Greg Mankiw

Update: When I wrote the original post, I probably should have chosen my a better phrase than "debunking" when referring to Fama's recent work . I was referring to his work with Kenneth French on Size and Book-to-Market as proxies for factors with more explanatory power than the traditional CAPM "beta" in explaining returns. So a more correct way of describing Fama's later work would be "debunking the traditional CAPM model".

One way to interpret his work with French is that there are risk factors (size, book to market) other than the CAPM systematic risk beta that are priced in the market. So he's not exactly taking shots at the efficient markets hy[pothesis rather than at the risk-return model that was most often used to test it.

Interview With Victor Niederhoffer

Victor Niederhoffer is one of the more colorful figures in the investment world. He earned a Ph.D. from the U of Chicago in the 60s (where he regularly sparred with proponents of the Efficient Markets Hypothesis), was a national squash champion, and has seen it all, from being one of the top investment managers in the country to running a couple of hedge funds into the ground (and bouncing back to start others).

He wrote quite a few pieces on a site he started in the late 90's called DailySpeculations.com. One of them actually got me started on a research project (it didn't pan out, but it was still a good idea). He's also written a couple of very interesting books.

If you'd like to read more about him, here's a very good piece, compliments of NewYorker.com. It's pretty long (12 pages), but IMO well worth the time.

I Made It Through The Week!

I survived the week. And everything went well:

• My trip to my former school went well - my student successfully defended her proposal, and won't have to do much more empirical work to finish her dissertation. She does, however, have to do a better job of fleshing out her literature review, hypothesis development, and discussion of results.
• The class I taught on SAS programming was well received - the students were pretty engaged, asked a lot of questions, and seemed to get a lot out of the material.
• My coauthor and I did a lot of work on our paper.
• I survived the CFA class - it's the same modules I taught last year, so there was minimal prep.
• My graduate assistant is working on the project I assigned (the one he was trying to duck earlier). He seems to have actually made some progress.
• My students blew off class again today. So, those who showed up got another bonus. And in addition, they actually got to see the problem set that's due on Wednesday. And since there's no class on Monday, those that were absent pretty much gave themselves an auto-screwing.
  

And last but not least, I just got another revise-and-resubmit from a journal today. Now it's off to the Unknown Wife's Homecoming at her former school. We're spending a couple of days with a college friend of hers and touring the Big City on the way back.

A Crazy Week Ahead

It's yet another week where I've bitten off more than I should have:

• I taught my regular classes yesterday (Monday). After my last class I met with my grad assistant to give him his first assignment for the semester. I'm starting a project on the effect of dividends on firm risk, and he's putting together the initial data set. So, I spent an hour with him going over the steps needed to be done, the layout of the CRSP data files, and a few SAS tips he might need to know (or research further). Right after that, another grad student stopped by with some "simple" questions on how SAS handles date variables (ironically, some of the same stuff I'd just gone over with grad student #1). One hour later, I finished with him and left to meet Unknown Family at Unknown Son's new dojo (karate school) for his first "group" class. He looked pretty sharp in his new gi (the uniform). But it was all I could do to keep from laughing as he repeatedly spaced out in class and started posing in front of the mirror (I think he's still more excited about the idea of learning Karate than he is about the actual learning itself). He's also completely smitten with the 12 year-old brown belt who was helping out with the class (I guess he didn't realize that it's always dangerous to go after older women who can kick your butt).
  
• Once home, Unknown Wife went off to a parent's meeting for Unknown Daughter's Girl Scout troop while Unknown Son and I wrestled with his homework. After Unknown Wife got back and we got the kids to sleep, I ended up writing SAS code until midnight to put together a small data set for a short tutorial I'm giving to doctoral students at my former school (more on that in a minute)
• Today I take the train to the nearby big city for the day. I'll spend the day in the library at a large research university gathering data (they have resources we don't, but graciously allow access to nearby faculty), and then teach a CFA prep class in the evening. After all this is done, I'll end up back at the Unknown House at around 11.
• Wednesday, I teach classes until about 2, and then immediately rush to the airport for a short (1 hour) plane ride back to my old haunts. After landing, I'll work until the wee hours Wednesday night on a paper with a colleague (I'm staying at her family's place).
• Thursday morning, I attend the dissertation proposal defense of one of my former students (I sit on her committee, and the colleague mentioned previously is her dissertation chair). Then in the afternoon, I give a two-hour tutorialto the grad students at the same school on basic SAS procedures used often in financial/accounting research .
  
• After that, it's back on the plane and back to the Unknown Household for a few hours sleep.
  
• Friday, it's back in the classroom, followed by a meeting with my grad assistant to check on his progress (he's tried to weasel out of a previous assignment, s0 this time he gets tight controls put on him - after all, if a corporate finance guy doesn't understand agency problems, he doesn't understand much).
  

Somehow, in the midst of all this I have to put up slides for the following week's classes and put together a problem set for my investments class (they have an exam next week, and I always give a pretty tough problem set the week prior to the exam as a form of "enforced" practice). And then there are the matters of the revise and resubmit that's sitting on my desk and the new project that my coauthors are breathing down my neck on.

But griping aside, I'll get it all done somehow. Even with all this, academia is still the best job in the world. I should know - I've had a number of "real" jobs, and there's no comparison.

More On Fundamental Indexing

In doing a bit of preparation for this week's classes (it's mutual fund week in my investments class) I came across a resource called The Journal of Indexes - put out by Indexuniverse.com. It has a wealth of information on indexing and index funds, and is well worth a look see.

To whet your appetite, here's a piece from the journal on "fundamental indexing", which I've blogged about before (i.e. here, and here). In case you're unfamiliar with the term, a "fundamental" index is one where the individual stocks in the index are weighted based on some "fundamental" factor, like cash flow, dividends, revenue, or profits. So in one sense, they're the close relatives to market capitalization-weighted (instead of weighting by market cap, they weight by dividends, sales profits, etc...). Proponents of fundamental indexing claim that cap-weighted indexes over-represent companies that have grown rapidly and are therefore likely to be overvalued. So, their reasoning for "fundamental" indexing is that it corrects some of this supposed mis-weighting.

The article, titled "Fundamental Indexing Smackdown", consists of discussions between two proponents of fundamental indexes (Rob Arnott and Jeremy Siegel) and one sceptic and promoter of traditional mcap-weighted indexes (Gus Sauter).

The three commenters are among the biggest dogs in the indexing pack, so the article is (not surprisingly) a pretty good one. Enjoy.