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NEWS FROM THE INSTITUTE AT CLAREMONT MCKENNA COLLEGE

CMC PRESIDENT VOLUME 12, SPRING 2011 Pamela Brooks Gann BOARD OF ADVISORS Director’s Report James B. McElwee ’74 P’12 (Chair) Weston Presidio (Retired) by Eric Hughson Kenneth D. Brody Taconic Capital Advisors, LLC William S. Broeksmit ’77 P’12 THIS YEAR WAS that the differences in discounts across Deutsche Morgan Grenfell the eighth year for the retailers can be partially explained by the Brent R. Harris ’81 FEI. The FEI is the different risks that these retailers have of Pacific Company Alan C. Heuberger ’96 finance research arm of going bankrupt. In bankruptcy, there is both Cascade Investment the Robert Day School a possibility that the retailer will no longer Kurt M. Hocker ’88 of Economics and honor the gift cards and also a possibility that Union Gregg E. Ireland ’72 Finance, providing data the selection of merchandise available will be Capital Research and Management Company and research support limited. One seeming problem with this Eric Hughson Grant Kvalheim ’78 P’12 for faculty, and more explanation is that if a retailer is currently Capital (Retired) importantly, providing not bankrupt and its cards were selling at a John R. Shrewsberry ’87 Bank research experience for students. There are significant discount then somebody could Robert P. Thomas ’99 currently 88 students in the Financial buy the cards on the secondary market and The George Kaiser Family Foundation Economics Sequence: 22 seniors, 35 juniors, immediately use them. This should push the BOARD ASSOCIATES Scott A. Ashby ’95 22 sophomores, and 9 freshmen. price of the gift cards up, and bankruptcy risk Usually, we have FEI students should no longer matter. Brian L. Badertscher ’96 summarize the public lectures of finance Societe Generale See Director’s Report on page 2 Justin W. Braun ’98 academics for the newsletter, and this year is Asterisk Financial, Inc. no different. In this issue, Sara Reed will James B. Carroll ’77 summarize Jonathan Berk’s talk about the LongRun Capital Management, LLC In This Issue: implications of economic theory for Kerry Fanwick ’76 PG 2: Director’s Report Continued; FEI BRE Properties, Inc. managerial performance in the Russell Greenberg ’79 industry. What I would like to do is highlight Summer RAs Altus Capital Partners some of the research our students are doing. Justin Hance ’06 PG 3 : 2011 NYC Networking Trip Harris Associates, LP I would like to begin with the student PG 4: Sara Reed ’12 Summarizes Carol O. Hartman ’86 who won the award for best thesis in The Caldwell Partners International financial economics, Kaitlyn Desai. It is well Jonathan Berk’s Ath Talk Susan Matteson King ’85 known that store gift cards sell at a discount Jim Koon ’81 PG 5: Spring 2011 Student Research TCF Bank relative to face value on the secondary Analysts Christine Huk Mann ’87 market. In her thesis, Kaitlyn identifies the Goldman Sachs & Company determinants of this discount. One obvious PG 6: Where Will FEI Students Be Michael Nutting ’97 Working? The Gores Group reason that the cards sell at a discount is that John O’Brien ’02 the stores that issue them sell similar goods PG 7: FEI Affiliated Faculty Publications Cascade Investment at higher prices than can be obtained Adam J. Prager ’01 elsewhere. But even after accounting for that, PG 8: Recognizing FEI Seniors and Warner Brothers Entertainment, Inc. Upcoming Events Nicholas M. Shurgot ’95 the puzzle remains. What Kaitlyn finds is Saddle Peak, LLC Kevin K.C. Tan ’86 The Northern Trust Company Joseph W. Vencil ’85 AlphaWorks, LLC Robert C. Wetenhall, Jr. ’94 Royal DIRECTOR Eric Hughson ASSOCIATE DIRECTOR The Financial Economics Institute fosters education and research in financial economics by Lisa Meulbroek offering a unique undergraduate curricular program, the Financial Economics Sequence, ASSISTANT TO THE DIRECTORS Terri L. Van Eaton supporting state-of-the-art databases, and encouraging student-faculty interaction on research. 2 THE FINANCIAL ECONOMICS INSTITUTE

senators do not make abnormally large congressmen profit from their insider Director’s Report from page 1 profits on their trades after accounting for information through trading requires that But Kaitlyn argues convincingly that risk. This is true even for senators who leave they report exactly when and how much bankruptcy risk should be a problem anyway. office, so that there is no need for them to they trade. This is because these cards are held for a eschew in order to be On the teaching front, we will begin significant time by middle-men such as Plastic reelected. But he postulates that the reason teaching Econ 194, Investment Management, Jungle . If Plastic Jungle cannot re-sell the next fall. This course is built around the cards right away, there is a possibility that a CMC Student Investment Fund and is designed to give students a practical retailer will go bankrupt during the time Thanks to a Plastic Jungle is holding the cards. To reduce experience in valuation and asset allocation— with some academic content. Our new the risk that Plastic Jungle is left holding partnership with worthless plastic, it discounts the cards so “ videoconferencing equipment has been that they sell more quickly, and the discounts installed, and we will be contacting some are higher when retailers are in financial the Robert Day of you in the near future to ask if you distress. This is a nice contribution, and we would help us with evaluating student hope that because she will have so much free School, we have been investment pitches. time as an Analyst at , Kaitlyn Thanks to a partnership with the Robert decides to devote more effort to publish able to expand not Day School, we have been able to expand not the paper. only practice interviewing, but also student Another nice thesis this year was Scott only practice networking trips. We now sponsor three Yingling’s investigation of the personal stock trips: one in Los Angeles in the spring geared transactions of U.S. Senators. It is not well interviewing, but to sophomores looking to learn about jobs known that U.S. Senators are exempt from available in finance; another in Los Angeles insider trading regulations. Further, it is clear also student in the early autumn, and our January New that senators can have private information York Trip. This is helpful because the New that can affect firm value. The motivating networking trips. York trip has served as a springboard for example Scott uses is the anecdote that Dick junior student interviews for internships, and Durbin supposedly sold stocks after ” sophomores had been crowded out. We are attending a closed-door meeting in hoping that the additional exposure will help September 2008 where he learned that the for the non-result is that measuring our students be more competitive for financial crisis was worse than expected. abnormal returns for congressional trades is internships as well as for full-time Indeed, Congress is aware of the problem, difficult because congressmen are not employment. This year, at least, students and legislation has been introduced to halt required to report either the magnitudes of have been more successful at securing congressional trading on inside information. their trades or the day those trades are made. internships in finance than they had been in Perhaps surprisingly, Scott finds that To really address whether or not previous years. ▲

Congratulations to the FEI Summer 2011 RAs:

VIKEN DOUZDJIAN ’13, Economics/Mathematics major

STACIE HETTRICK ’13, Economics/International Relations major

NIKHIL LEDLIE ’13, Economics/Mathematics major

BENJAMIN PYLE ’13 , PPE/Mathematics major

YIJING (ARTEMIS) SHEN ’13 (Scripps), Mathematics and Economics major

HAO TANG ’12 (Pomona), Economics major

SAMUEL WONG ’13, Mathematics/Economics major CLAREMONT MCKENNA COLLEGE 3

2011 City Networking Trip By Scott Yingling ’11, FEI Student Research Analyst

DURING THE WEEK OF JANUARY 10, Citi and met with Doug Peterson ’80, COO manager at Citi Global Transaction Services; 2011, the Financial Economics Institute of Citibank. He gave the students a broad Marc Rollins ’07, an analyst at JP Morgan sponsored the eighth annual overview of and spoke about his ; Mike Karp ’06, working in Networking Trip, which provided an career path and international experiences that Business Insights at ; Susie extraordinary learning experience for led him to his current position as COO of Kim ’06, an analyst in San Francisco’s fourteen juniors and three seniors. Citibank. The students also spoke with Ben Technology, Media, and Telecom group; and This was the second year that the trip Taborsky HMC ’09 and CMC Robert Day Kyle Salter ’07, from the Human Capital was organized by students. The student-run Scholar ’09, about his experiences as a Management Team at Goldman Sachs. committee was comprised of a group of three quantitative trading analyst at Citi. These alums provided helpful advice on the seniors and one junior: Kaitlyn Desai ’11, Additionally, a panel of HR representatives interview process, anecdotes about work after Nathan Doctor ’11, Scott Yingling ’11, and fielded questions from the students about CMC, and informal perspectives. Jeff McNerney ’12. The students met on a recruiting and internship opportunities. On Thursday, the final day of activities weekly basis to organize everything ranging On Tuesday evening, the students in New York City, students began their day from firm visits to networking events. attended a CMC Alumni Association by visiting Deloitte Consulting. Celia Ramos, During the week, the students visited reception hosted by Doug Peterson ’80 at a Senior Manager; David Carney, principal; eight firms including: Deutsche Bank, J.P. Citi. Despite the looming snowstorm, the and Josh Siegel ’10, a business analyst, hosted Morgan, Morgan Stanley, Royal Bank of reception drew many members of the CMC the students at Deloitte. Following a Canada, Wells Fargo, Deloitte Consulting, community including current students, presentation which provided an overview of CitiGroup, and Goldman Sachs. In alumni, parents, and CMC faculty. The the consulting industry, students participated addition, they attended an opening cocktail evening gave students an excellent in an analyst panel which enabled students to party, an alumni reception dinner, and a opportunity to interact with alumni, establish ask candid questions. The visit to Deloitte young alumni panel. contacts, and openly ask questions outside a provided a great opportunity for the students The week in NYC began with an formal business setting. to learn about the differences between introductory cocktail reception that was Wednesday morning, the students consulting and banking. hosted by Alan Delsman ’68 at his home in visited JP Morgan, where they were hosted Early Thursday afternoon, the group Brooklyn Heights. At the reception, students by Peter Barker ’70 P’01, the California head headed downtown to meet Robert Wetenhall had hors d’oeuvres with several CMC alumni of JP Morgan; and Susie Kim ’06, an analyst ’94, Vice President, High Yield Research working in the field of finance. in San Francisco’s Technology, Media, and Analyst—U.S. Debt Markets, and Steve On Tuesday morning, the students Telecom group. Mr. Barker shared stories McGhee ’95, a senior trader in the Global enjoyed breakfast with Scott Ashby ’95 at from his experience at CMC as well as his Arbitrage Trading Group, to get an overview Morgan Stanley. Mr. Ashby discussed his role career path and answered questions from of Sales and Trading at the Royal Bank of as managing director, how the MS firm students. The students had the opportunity Canada. Mr. Wetenhall gave the students a culture is different from other investment to speak with a panel of four analysts, which tour of the firm’s trading floor, where scenes , and how a position in Debt Capital included Marc Rollins ’07, an analyst in JP from the recent film : Money Never Markets is unique from other jobs within an Morgan Private Banking in NYC, as well as Sleeps were shot. investment bank. This discussion included two representatives from HR who discussed The final visit was to Goldman Sachs Morgan Stanley’s recent role in the internships and the recruiting process. where the students met with David Alvillar government’s regulatory changes. The On Wednesday afternoon, the students ’01, a Vice President in Capital Structure students also enjoyed speaking with an headed to Wells Fargo for lunch where they Finance Trading; and Andrew Kaiser P’13, analyst panel, where they asked questions were hosted by Michael Cummings a COO of the Goldman Sachs Bank. Mr. about the transition from college to the first Managing Director and Business Manager in Kaiser discussed some of the bank’s broader years on Wall Street. the Securities & Investment Group for Wells strategies in addition to Goldman’s role in the Next, students visited Deutsche Bank’s Fargo Securities. The students also had a recent governmental and regulatory changes Risk Management Department and Q&A session with an analyst and associate. facing the finance world. Mr. Alvillar had lunch with Alan Delsman ’68, Managing John Shrewsberry ’87, Executive Vice introduced students to the organization and Director; Rich Ferguson ’80, Managing President and Group Head of Securities and culture of Goldman Sachs as well as an array Director, Treasurer—Americas; Tejas Gala Investment Group at Wells Fargo, was the of opportunities within the bank. Kyle Salter ’09, a market risk management analyst; and alumni contact who made this visit possible. ’07, from the Human Capital Management Zain Jamal ’10, credit risk management This year was the second year that the team discussed the recruiting process and analyst. The students discussed the role of students had a dinner with young alumni internship possibilities with the students. risk management in an investment bank and from the Claremont Colleges. Attending the This year, Deutsche Bank, RBC, and how to evaluate this risk, especially in the dinner were Tejas Gala ’09, a market risk Goldman Sachs took the initiative to current economic environment. management analyst at Deutsche Bank; In the afternoon, the students visited Erinn Lachner ’07, an associate project See NYC Networking Trip on page 4 4 THE FINANCIAL ECONOMICS INSTITUTE

Are Mutual Fund Managers Skilled? By Jonathan B. Berk Summarized by Sara Reed CMC ’12, FEI Student Research Analyst

ON THURSDAY, APRIL 14, 2011 THE from those skills. Here, it is the active Financial Economics Institute welcomed managers who possess the skill and make the Jonathan B. Berk, the A.P. Giannini rents. Investors therefore earn no more (and Professor of Finance at Stanford University’s no less) by investing with active managers Graduate School of Business, to the Marian than by indexing. If one computes Miner Cook Athenaeum. Professor Berk managerial profits properly, where these presented his paper on “Mutual Fund Flows profits equal gross fund returns times fund and Performance in Rational Markets.” He size, one finds that these profits are indeed posed the fundamental question: “Are mutual predictable. Professor Berk also finds that the fund managers skilled?” He then presented responsiveness of capital flows to returns can two commonly held myths: 1) investors in be explained by a model in which investors actively managed funds should do better than learn about managerial quality from investors in passively managed funds, and 2) performance. Indeed, in the term, Berk performance in actively managed funds finds that return chasing by investors can should be predictable—a fund that generate abnormally high profits, although JONATHAN B. BERK outperforms other funds should continue eventually, everyone learns who the good to outperform. managers are and again, the returns from However, the literature posits that investing with active managers who have California, Berkeley. He is currently teaching neither myth is true. Investors do not receive performed well in the past falls to zero in Institutional Money Management and higher returns in active funds rather than expectation. Perhaps the only place where Critical Analytical Thinking at Stanford. passive funds. Further, fund performance Professor Berk needs to rely on suboptimal Professor Berk’s research is primarily tends not to be predictable, with the investor behavior to explain an empirical theoretical in nature and spans a broad range exception of the worst performing funds. regularity is to explain the predictably low of topics in finance such as delegated money Hence, it appears that active fund managers returns of the worst-performing funds. For management, asset pricing, valuing the firm’s add little or no value. Interestingly, investors those funds not to lose all investors, it must growth potential, the firm’s capital structure appear to behave as if neither empirical fact be that some investors must be insensitive to decision, and the interaction between labor were true because they chase past performance. Perhaps those who do not markets and financial markets. He has co- performance. When a fund performs well, abandon badly performing funds are simply authored two finance textbooks: Corporate capital flows in as compared to when a fund not paying attention. Berk notes that this Finance and Fundamentals of Finance . Due to performs badly, capital flows out. This is same empirical regularity is also observed in his influence on finance, he has received the seemingly paradoxical in light of the mortgage refinancing, where some borrowers Graham and Dodd Award of Excellence, the empirical evidence. do not refinance, no matter how far interest Roger F. Murray Prize, and the Bernstein- Professor Berk posits a simple rational rates fall. Fabozzi/Jacobs Levy Award. He was the model of both manager and investor Professor Berk received his Ph.D. in associate editor of the Journal of Finance from behavior which potentially explains the Finance from Yale University. Before 2000-2008, and is a Research Associate at the empirical evidence. The model relies on the teaching at Stanford, he was the Sylvan National Bureau of Economic Research. ▲ observation that it is those who possess skill Coleman Professor of Finance at Haas that is in short supply who make the rents School of Business at the University of

an analyst—and one management. The breadth of firms allowed NYC Networking Trip from page 3 student will be joining Goldman Sachs as an students to gain a greater insight into the interview students while they were in New investment banking analyst. many different opportunities within the field York. Several students have already secured The eighth annual New York City of finance, and the experience will prove summer internships based on interviews and Networking Trip was a great success. It tied a invaluable as the students work to establish connections made in New York. Two record set by last year’s trip in the number of themselves in careers in finance. ▲ students will be joining RBC this summer— firms visited, spanning consulting, investment one as an equity research analyst and one as banking, sales and trading, and asset CLAREMONT MCKENNA COLLEGE 5

Financial Economics Institute Spring 2011 Student Research Analysts During the Spring 2011 semester, seventeen student Research Analysts are assisting faculty members with research projects. The following is a list of the students, the topics they are researching, and their faculty advisors:

WILLIAM LOCKE BROWN ’14, Patent ARJUN KAPUR ’14, Patent Litigation in DANIYAL SHAHID ’13, Genetic Disposition Litigation in Pharmaceuticals with Professor Pharmaceuticals with Professor Eric Helland and the Market: Wall Street Traders and the Eric Helland Warrior Gene with Professor Paul Zak at SAUMYA LOHIA ’12, Global Implications of Claremont Graduate University MAXWELL CHAMBERS ’12, Accounting for the Current Financial Crisis with Professor the Share Price Movements of Publicly Traded Sven Arndt DANIEL SHANE ’13, The Impact that General European Football Teams with Professor Managers and Team Managers Have on a Richard Burdekin ANDREW OETTING ’12, College and Baseball Team’s Performance with Professor University Endowments in the Current Janet Smith NATHAN DOCTOR ’11, Patent Litigation in Recession with Professor Lisa Meulbroek and Pharmaceuticals with Professor Eric Helland Professor Janet Smith NICHOLAS (COADY) SMITH ’12, The Downfall of Long-Term Capital Management JUSTIN ESKIND ’11, Bloomberg and Stata KEVIN POTTERTON ’12, The Relation with Professor Ludwig Chincarini at Tutor for the FEI Between the Probability of Informed Trade and Pomona College Trading Costs on Financial Markets with ’11, Genetic Disposition and Professor Eric Hughson JENNIFER VOLK ’11, What Beta We Should the Market: Wall Street Traders and the Consider: A CAPM Critique with Professor Warrior Gene with Professor Paul Zak at SARA REED ’12, College and University Yosef Bonaparte Claremont Graduate University Endowments in the Current Recession with Professor Lisa Meulbroek and Professor SZE WAI YUEN ’12, Reexamination of the ALEX JOHNSON ’13, Effect of an Janet Smith Endowment Effect with Professor Ananda Introduction of a Clearinghouse on Ganguly and What Drives Quarterly Stock Prices with Professor Eric Hughson ALEXANDER REICHERT ’11, An Earnings Announcement Reactions? Disclosure Examination of the Endowment Effect with Detail vs. Institutional Ownership with Professor Ananda Ganguly Professor Joshua Rosett

Back row, row from left: Nicholas (Coady) Smith ’12, Rajat Gupta ’11, Daniyal Shahid ’13, Arjun Kapur ’14, Kevin Potterton ’12, Maxwell Chambers ’12. Front row from left: Nathan Doctor ’11, Sze Wai Yuen ’12, Alex Johnson ’13, Jennifer Volk ’11, Alexander Reichert ’11. 6 THE FINANCIAL ECONOMICS INSTITUTE

Where Will FEI Students Be Working?

CONGRATUATIONS TO THE FOLLOWING SENIORS AND JUNIORS COMPLETING THE FINANCIAL ECONOMICS Sequence who have notified the FEI that they have secured a full-time job, placement in graduate school, or a summer internship. This list identifies the students’ major(s) and their place of employment.

ROBERT MILLER ’12, Economics, Monitor Graduating Financial Economics Financial Economics Sequence Consulting Group (Boston, MA) Sequence Seniors: Juniors – Summer Positions: ANDREW OETTING ’12, Economics/ LEWIS CORSON ’11, Economics, Houlihan ALEXANDRA ABRAMOVITZ ’12, Mathematics, Cascade Investment Lokey (Los Angeles, CA) Economics-Accounting, Citigroup – Risk (Kirkland, WA) Management (New York, NY) KAITLYN DESAI ’11, Economics- RISHABH PAREKH ’12, Science Accounting, Deutsche Bank (New SASI DESAI ’12, Economics and Management, Lombardia Capital Partners York, NY) Mathematics, Relational Investors LLC (Pasadena, CA) (San Diego, CA) NATHAN DOCTOR ’11, Economics, Cascade KEVIN POTTERTON ’12, Economics/ Investment (Kirkland, WA) ANDREW DUCKWORTH ’12, Economics, Mathematics, RBC Capital Markets – Goldman Sachs – Sales & Trading (New Global Markets (New York, NY) JUSTIN ESKIND ’11, Economics, BNP York, NY) Paribas (New York, NY) SARA REED ’12, Economics, Deutsche AUSTIN HALLETT ’12, Economics/Legal Bank – Risk Management (New York, NY) RAJAT GUPTA ’11, Economics/Mathematics, Studies, Navigant Consulting (Los Angeles, Bain and Company (Claremont, CA) Also CA) JASON REHHAUT 12, Economics- accepted as an MBA student at Stanford, Accounting, Deloitte and Touche (Los class of 2015 SERGIO HERNANDEZ ’12, Economics, Angeles, CA) Kaiser Permanente (Oakland, CA) EMILY HIRANO ’11, Economics-Accounting, ANDREW SEGAL ’12, Economics- Semler Brossy Consulting Group (Los AVERY HOLLAND ’12, Economics, Accounting, – Investment Angeles, CA) Greenhill and Co. (Los Angeles, CA) Banking Division (Century City, CA)

SHAUN KHUBCHANDANI ’11, Economics, BRANT KERSTEN ’12, Economics, SRA NICHOLAS (COADY) SMITH ’12, Citigroup Global Banking (New York, NY) International – Government Contracts Economics/Mathematics, and Procurements (Washington, DC) Lynch – Investment Banking (Los BENJAMIN KRAUS ’11, Economics/ Angeles, CA) Mathematics, Morgan Stanley (New KWENDY LAU ’12, Economics/Mathematics, York, NY) JPMorgan (Los Angeles, CA) JUSTIN SPITZER ’12, Economics, Citigroup Global Transaction Services (San ALEXANDER REICHERT ’11, Economics, SAUMYA LOHIA ’12, Francisco, CA) RBC Capital Markets (New York, NY) Economics/Mathematics, Goldman Sachs – Investment Banking (New York, NY) DANA STALEY ’12, Economics, Goldman JACOB SPRING ’11, Economics-Accounting, Sachs – Private (San Deloitte (Los Angeles, CA) ROSABELLA MAGAT ’12, Economics/ Francisco, CA) Mathematics, Goldman Sachs – Corporate JENNIFER VOLK ’11, Economics, Barclays Treasury – Finance Division (New York, DAVID ULRICH ’12, Economics, RBC Capital (Menlo Park, CA) NY) Capital Markets – Investment Banking (New York, NY) SCOTT YINGLING ’11, Economics- LACEY MCLEAN ’12, Economics- Accounting, Harris Williams & Co. Accounting, PACCAR, Inc. – Accounting ANDREW YANDELL ’12, Economics/ (Richmond, VA) (Bellevue, WA) Spanish, Reisers Genussmanufaktur (Wurtzbourg, Germany) ERIC ZACHARIAS ’11, Economics/ JEFFREY MCNERNEY ’12, Economics and Mathematics, Investment Banking PPE, Lazard – Investment Banking (Los (Los Angeles, CA) Angeles, CA) CLAREMONT MCKENNA COLLEGE 7

FEI Affiliated Faculty Research Selected 2010-11 publications by faculty members affiliated with the FEI: u “Free Trade and Its Alternatives,” ( Sven u “Demand for Attendance—Price u “Estimating the effects of large Arndt ), in M.E. Kreinin and M.G. Measurement,” ( Richard Burdekin ) in shareholders using a geographic Plummer (eds.), Handbook on International Stephen Shmanske and Leo H. Kahane instrument,” ( Henrik Cronqvist with Bo Commercial Policy (Oxford: Oxford (eds.), Oxford Handbook of Sports Economics, Becker and Rüdiger Fahlenbrach), Journal University Press), forthcoming New York: Oxford University Press, of Financial and Quantitative Analysis, u “Intra-Industry Trade and the Open forthcoming forthcoming Economy,” ( Sven Arndt ), Korea and the u “Sugar in Hawaii: The Potential for u “Nature or nurture: What determines World Economy, December 2010, 11, No. 3 Sugarcane Ethanol in Reducing Energy investor behavior?,” ( Henrik Cronqvist u “Corporate social responsibility as a Dependence,” ( Richard Burdekin with with Amir Barnea and Stephan Siegel) conflict between shareholders,” ( Amir Erin Liu), in Peter T. Jenkins (ed.), The Journal of Financial Economics, December 10, Barnea with Amir Rubin), Journal of Sugar Industry and Cotton Crops, Hauppauge, 98, pp. 583-604 Business Ethics, November 2010, 97, No. 1, NY: Nova Science Publishers, 2010, pp. u “The Impacts of the Rise of Paragraph IV pp. 71-86 147-166 Challenges on Startup Alliance Formation u “Household Search Choice: Theory and u “ Funds: An Introduction,” and Firm Value in the Pharmaceutical Evidence,” ( Yosef Bonaparte and Frank (Ludwig Chincarini ), Chapter 1, Research Industry,” ( Darren Filson with Ahmed Fabozzi), Applied Economics, forthcoming Handbook on Hedge Funds, and Oweis), Journal of Health Economics, July u “Explaining Production Inefficiency in Alternative Investments, forthcoming 2011 2010, 29:4, pp. 575-84 China’s Agriculture using Data u “A Multi-Asset Approach to Inflation u “Judicial Expenditures and Litigation Envelopment Analysis and Semi- Hedging for a US Investor,” ( Ludwig Access: Evidence from Auto Injuries,” Parametric Bootstrapping,” ( Yosef (Eric Helland with Paul Heaton), Journal Bonaparte , Zhuo Chen, and Daniel Chincarini with Salvatore Bruno), Journal of Legal Studies, forthcoming Monchuk), China Economic Review, 21 of Portfolio Management, Spring 2011 (2010): pp. 346-354 u “Home Bias and International Betting u “Bargaining in the Shadow of the Website: u “Savings Selectivity Bias, Subjective Markets: Can Institutional Constraints Disclosure’s Impact on Litigation Expectations, and Stock Market and Behavioral Biases Lead to Arbitrage Behavior,” ( Eric Helland with Gia Lee), Participation,” ( Yosef Bonaparte and Profits?” ( Ludwig Chincarini with American Law and Economics Review, Frank Fabozzi), Applied Financial Economics, Christina Contreras), Journal of Gambling forthcoming 2011, Vol. 21, Issue 3, pp. 119-130 and Economics, December 2010, pp. 20-30 u “Who Gets Stopped at the Gate: An u “Is Food Consumption a Good Proxy for u “No Chills or Burns from Temperature Empirical Examination of the Effect of Nondurable Consumption?” ( Yosef Surprises: An Empirical Analysis of the Daubert on Expert Witnesses,” ( Eric Bonaparte and Frank Fabozzi), Economics Weather Derivatives Market,” ( Ludwig Helland with Jon Klick), Supreme Court Letters, 2011, Vol. 111, Issue 2, pp. Chincarini ), Journal of Futures Markets, Economic Review, forthcoming 110-112 January 2011, pp. 1-33 u “The Two-Child Paradox Reborn?,” u “Irving Fisher and Price-Level Targeting u “A Historical Examination of Optimal (Gary Smith with Stephen Marks), in Austria: Was Silver the Answer?” Real Return Portfolios for Non-US Chance, 24, 1, 2011, pp. 54-59 (Richard Burdekin with Kris James Investors,” ( Ludwig Chincarini with u “Another Look at Baseball Player Initials Mitchener and Marc D. Weidenmier ), Salvatore Bruno), Review of Financial and Longevity,” ( Gary Smith ), Perceptual Journal of Money, Credit, and Banking, Economics, October 2010, pp. 161-178 and Motor Skills, 112, 1, 2011, pp. 211-216. forthcoming u “Optimal Real Return Portfolios,” u “Entrepreneurial Finance: Strategy, u “An ABC Guide to Provincial Lending (Ludwig Chincarini with Salvatore Patterns in China: Progress and Valuation, and Deal Structure,” ( Janet Prospects,” ( Richard Burdekin and Ran Bruno), Investments and Wealth Monitor, Smith with R. Smith and R. Bliss), Tao), The Chinese Economy, forthcoming July/August 2010 Stanford University Press, 2011, forthcoming u “Offshore versus Local Listings of u “Behavioral consistency in corporate Taiwanese Firms: Evidence from , finance: CEO personal leverage and u “The Paradox of ‘Fraud-on-the-Market New York and Taipei,” ( Richard corporate leverage,” ( Henrik Cronqvist Theory’: Who Relies on the Efficiency of Burdekin with Hsin-hui I. H. Whited), with Anil Makhija and Scott Yonker), Market Prices?,” ( Janet Smith with G. Applied Financial Economics, Vol. 21, No. 9 Journal of Financial Economics, 2011, Erenburg and R. Smith), Journal of (2011), pp. 637-649 forthcoming Empirical Legal Studies, forthcoming 8 THE FINANCIAL ECONOMICS INSTITUTE AT CLAREMONT MCKENNA COLLEGE

Congratulations Class of 2011!

THE FINANCIAL ECONOMICS INSTITUTE WOULD LIKE TO CONGRATULATE THE GRADUATING SENIORS OF 2011. The following is a list of seniors who completed the Financial Economics Sequence and the titles of their theses. We would also like to announce that Kaitlyn Desai wrote the Best Thesis in Financial Economics for 2010-2011! Congratulations!!

ANTHONY BOUVIER, The Effect of Age Upon EMILY HIRANO, The Effects of Industry on BRETT SPENCER, Credit Market CEO Compensation: A Cross-Industry Study Cross-Border and Domestic IPO Underpricing Imperfections, Financial Crisis and the Transmission of Monetary Policy LOUIS CORSON, Private Equity Transaction REED HOGAN, Quantifying the Variance Risk Bankruptcy Risk Prediction Premium in VIX Options JACOB SPRING, The Role of Fair Value Accounting in Bank Failures 2001-2010 ANDREW COSENTINO, An Analysis of SHAUN KHUBCHANDANI, How Are Inflation Futures Curves and Returns of Oil ETFs Expectations Formed by Consumers, JENNIFER VOLK, Do Investors View Excess Economists and the Financial Market? Capacity as a Determinant of Mergers and KAITLYN DESAI, The Secondary Market for Acquisitions in the Pharmaceutical and Gift Cards and the Role of Corporate BENJAMIN KRAUS, Determining the Benefits Biotechnology Industry? Bankruptcy Risk and Profitability of Implied Correlation in Foreign ETF Options SEAN WASSERMAN, Analyzing the Effects NATHAN DOCTOR, The Impact of Boards of Changes, the Recent with Financial Expertise on University NOAH LEVIN, The Impact of Weather Financial Crisis and Other Variables on Endowment Returns Forecasts on Day-Ahead Power Prices Firms’ Debt Levels JUSTIN ESKIND, Factors Affecting the GAYLE LIM, How Did the Extension of the SCOTT YINGLING, Congressional Insider Forecasting Ability of Implied Correlation in U.S. Dividend Tax Cuts in 2010 Affect Trading: An Analysis of the Personal Common Currency Options Stock Prices? Stock Transactions of U.S. Senators RAJAT GUPTA, Diversification Premium on ALEXANDER REICHERT, The Value of the ERIC ZACHARIAS, Activist Investor Impact on Indian ADRs During the Financial Crisis Sovereign Credit Default Market: Domestic CEO Compensation of Investment Targets Stock Market Interaction and Contagion GRANT HEFFERNAN, Effect of Lockup Effects During Credit Crisis Agreements on Buyout Backed Initial Public Offerings

Upcoming Events

New York City Networking Trip

JANUARY 9-13, 2012 Seventeen CMC students will visit prestigious firms in NYC to gain exposure to Bauer Center, Room 321 various job opportunities 500 East Ninth Street in the financial markets Claremont, CA 91711-6400 and to establish Phone: (909) 607-0042 Fax: (909) 607-0088 relationships with CMC E-mail: [email protected] alumni working at these Website: http://www.claremontmckenna.edu/fei/ companies. Applications for the trip will be available in Bauer Center 321 in October, 2011.

VISIT OUR WEBSITE AT: http://www.claremontmckenna.edu/fei/

The Exchange newsletter is published by the Financial Economics Institute at Claremont McKenna College. If you would like copies of previous issues, or if you wish to have your name added or removed from our mailing list, e-mail [email protected] or write to the Financial Economics Institute, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA 91711 with your request.