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NEWS FROM THE FINANCIAL ECONOMICS INSTITUTE AT CLAREMONT MCKENNA COLLEGE

CMC PRESIDENT VOLUME 19, SPRING 2015 Hiram E. Chodosh RDS BOARD OF ADVISORS Director’s Report Peter K. Barker ’70 P’01 (Co-Chair) by Joshua Rosett JP Morgan Chase & Co. (Retired) James B. McElwee ’74 P’12 (Co-Chair) Independent Venture Capitalist THE 2014-15 Economics for his thesis titled 10b5-1 Plans Gary Birkenbeuel ’80 academic year and Earnings Management by High-Level Ernst & Young proved successful for Executives , in which he showed that firms J. Baxter Brinkmann P’16 the FEI as we manipulate earning ahead of stock The Brinkmann Corporation continued existing transactions under these plans in order to Jose Campos ’91 programming and obtain favorable pricing at transaction time. Deloitte & Touche LLP began looking to We would also like to note that one of our Heidi Nelson Cruz ’94 expand our reach in FES graduating seniors, T. Connor Schlegel, Goldman Sachs & Co. some directions. was awarded the Best Thesis in Economics, Nicholas P. Daifotis ’79 P’17 Joshua Rosett Regarding for his thesis on Strategic Risk Taking in RBC Capital Markets, LLC (Retired) continuing programming, we employed 32 Tournaments through the Lens of PGA Match Alan M. Delsman ’68 students during the Fall and Spring Play . Another FES graduating senior, Elan Deutsche Bank AG semesters, hired 8 full-time RAs last summer Bernstein, won the Outstanding Achievement Christopher Dodds P’13 P’15 and we’ve hired 7 full-time RAs for this in Quantitative Economics award. A past FEI The Carlyle Group summer, co-sponsored and participated in RA and current BMGI/Michael Larson Asset Maureen Downey ’93 the New York City Networking Trip, helped Pantheon Ventures organize and sponsored a pitch event for the See Director’s Report on page 2 Russell Greenberg ’79 CMC Student Investment Fund and two Altus Capital Partners finance conferences, brought in Randall Christopher D. Harris ’98 Kroszner as an Athenaeum speaker, and In This Issue: Damitz, Brooks, Nightingale, Turner, and Morrisset continued to support students by providing Alan C. Heuberger ’96 PG 2: Directors’ Report Continued; tutors for the Bloomberg Terminal as well as BMGI FEI Summer RAs & 2015-2016 Excel, Python, and Stata. On the initiative Stella Ho ’97 BMGI/Larson Fellows Moelis & Company front, we expanded programming in several PG 3-4: Andrew J. Kaiser P’13 areas, including data and tutoring support, 2015 NYC Networking Trip local finance-related programming, social Goldman Sachs Bank USA PG 5: Spring 2015 Student Research impact support (co-sponsoring a trip by 17 Christine Huk Mann ’87 Analysts Goldman Sachs & Co. CMC students to attend a conference and I. Joseph M. Massoud ’89 training program regarding local micro- PG 6 : SIF’s Claremont Finance Conference Anholt Services (USA) Inc. finance via the In-Lend organization), and PG 7: FEI Affiliated Faculty Publications Susan Matteson-King ’85 participated in the Research Institute Fair on Allianz Global Investors campus on April 3rd (we thank Ed Leathers PG 8: Recognizing FEI Seniors Therese Mrozek P’15 ’15, for his excellent representation of the Weston Presidio FEI at the event). PG 9: Recognizing FEI Seniors Continued; Thomas B. Neff ’76 During the 2014-15 academic year, 11 Randall Kroszner Speaks at the Ath FibroGen, Inc. students successfully completed the Financial PG 10: Where Will FEI Students Be John R. Shrewsberry ’87 Economics Sequence, and Joshua Thomas Working?; Upcoming Events Wells Fargo & Company won the prize for Best Thesis in Financial Robert P. Thomas ’99 The George Kaiser Family Foundation Julius Wang P’14 P’15 Samena Asia Managers FEI DIRECTOR Joshua Rosett ADMINISTRATOR Brian Dennis The Financial Economics Institute fosters education and research in financial economics by ASSISTANT TO THE DIRECTOR offering a unique undergraduate curricular program, the Financial Economics Sequence, Terri L. Van Eaton supporting state-of-the-art databases, and encouraging student-faculty interaction on research. 2 THE FINANCIAL ECONOMICS INSTITUTE

to the President, and from 2006 to 2009 As noted in the Fall newsletter, we hired Director’s Report from page 1 served as a Governor of the U.S. Federal Aviv Caspi ’16 to provide Python tutoring Reserve System. As such, he played an and support, and he assisted in a senior Management Fellow, Andrew Dodds, won important role in the Fed’s actions to thesis analyzing text components as part of a the award for Best Senior Overall. The mitigate the financial crisis that began in broader analysis of project financing via awards were announced at the Robert Day 2008. His talk at the Athenaeum focused on site Kickstarter. We are also School of Economics and Finance Awards the Fed’s responses to the financial crisis, as in negotiations with an outside group to Night at the Athenaeum on May 4th. well as initiatives to improve the stability of provide support for development of access Our previous report noted the Fall the financial sector and provide consumer to CommonCrawl, a web imaging project, 2014 Southern California Finance protection and disclosure for credit cards for projects in finance. Conference organized by Professors Mitch and mortgages. The Lowe Institute of Second, during the Spring semester, we Warachka and Eric Hughson, with keynote Political Economy co-sponsored Professor had two teams working on projects in local speaker Professor Ivo Welch of UCLA, as Kroszner’s visit to CMC. finance, one team constructing indices by well as the Student Investment Fund pitch In January, the FEI and RDS jointly geographic and industrial sectors for event including representatives of BMGI sponsored the New York City Networking publicly traded firms headquartered in and WestRiver Capital. We followed those Trip, taking 14 students to see a range of California. A second team began research up this Spring by helping to organize the firms across a variety of service types and on measures of deal activity in California, Student Investment Funds’ Claremont sizes within the financial sector. A highlight leveraging as one source of information one Finance Conference on February 13, 2015, was our visit to the floor of the New York of the new databases purchased last Fall. co-sponsored with the Pomona College and Stock Exchange. Several students These will appear on our new website, Scripps College Student Investment Funds. interviewed with firms while on the trip, slated to go online later this year. Though The conference included a luncheon at the and some will be doing their summer not yet begun, we also plan a real estate Athenaeum with a Keynote talk by Don internships this summer with firms we analysis component for Southern California Gould ’79 POM, President and Chief visited in January. We thank Michelle real estate segments. Investment Officer at Gould Asset Chamberlain for her excellent work Looking to next year, we anticipate Management, panel sessions at the organizing and leading the trip. working more closely with the CMC Freeberg Forum, a networking and cocktail During the year, we made progress on Student Investment Fund on several reception, and dinner at the Athenaeum several initiatives. First, regarding data, we aspects of our programming. Our tentative with Keynote Speaker Shaw Wagener ’81, reviewed our existing data offerings (we plans include collaboration in bringing Chairman at Capital Group International thank Gabriel Ayala ’16 for his excellent FEI/SIF alumni to campus for information and CMC Trustee. The event was co- work compiling this review) during the year sessions, and SIF participation in financial sponsored by the Robert Day School of and added two new databases from Bureau literacy training. Economics and Finance. Van Dijk noted in our Fall report. We Finally, in closing, on behalf of myself As part of the FEI Speaker Series, the subsequently sponsored a video conference and the many students and faculty who have Institute brought Randall S. Kroszner to training session for our faculty and students benefitted from the FEI’s activities this year, CMC as an Athenaeum speaker the evening provided by a Bureau Van Dijk support I thank both Terri Van Eaton and Brian of February 12, 2015 (see article on page 9). specialist. We consider data to be a high Dennis for their excellent work at the FEI. Kroszner is the Norman R. Bobins priority for the FEI, and over the summer Also, as always, I am grateful to the Robert Professor of Economics at the University of will be looking to add several additional Day School Board members and others for Chicago’s Booth School of Business, twice databases. We are also pursuing a strategy their generous contributions which make served on the Council of Economic Advisers for incorporation of big data into the FEI. these activities possible. ▲

Congratulations to the FEI Congratulations to the 2015-2016 BMGI/ Summer 2015 Research Analysts: Michael Larson Asset Management Fellows:

AMBERISH CHITRE ’18, Economics major RACHEL DOEHR ’16, Economics major with the Financial Economics QIANYUN “CAROLE” GAO ’17, Economics/Psychology dual Sequence major BRIAN ECKHARDT ’16, BA/MA – BA degree in Economics, Master’s PHILLIP JAUREGUI ’17, Psychology/Economics dual major degree in Finance KANISHK KAPUR ’18, Economics-Accounting major with the AMBER FALKNER ’16, BA/MA – BA degree in Economics, Master’s Financial Economics Sequence degree in Finance MINGDA LIU ’17, Economics-Accounting major SEAN SAKAGUCHI, PPE/Economics-Accounting dual major with the CHENGWU “HARRIS” XUAN ’17, Economics major Financial Economics Sequence YI “NORA” ZHANG ‘17, Economics/Mathematics dual major ALBERT XU ’17, Economics and Philosophy double major CLAREMONT MCKENNA COLLEGE 3

2015 New York City Networking Trip By Brian Delaney ’16 and Kaitlyn Kelleher ’17

THIS JANUARY, THE FINANCIAL ’01 introduced Goldman’s Securities Division benefits of a liberal arts education for an Economics Institute and the Robert Day to the group. Max Mullen ’12 and Shree analyst. School of Economics and Finance sponsored Pandya ’14 overviewed the Investment Tuesday concluded with a Dine Around the 12th annual New York City Networking Banking Division. program. Small groups or individual Trip. In the final week of winter break, nine The evening offered a networking students connected over dinner with alumni juniors and five sophomores traveled to reception hosted by Doug Peterson ’80 P ’14 at restaurants scattered across Manhattan. NYC to learn about the wide array of ’15, CEO of McGraw Hill Financial. The The nightly activities received rave reviews opportunities available in the financial event was well attended by many CMC when students returned to the hotel. The services industry. The trip offered chances alums living in the NYC area. unique opportunity to spend an evening for students to connect with various alumni The second day kicked off with a trip to with a single or small group of alumni left in both professional and casual settings. Moelis & Co., where Peter Li ’06 and Jordan students knowing that they will return from Michelle Chamberlain, Director of Stein ’14 hosted the group along with Senior the trip with at least one strong point of Employer Relations for the RDS, and Vice President Griff Norquist. Students future contact. Professor Joshua Rosett, Director of the received a brief presentation expounding the Greenhill & Co. started off Wednesday FEI, accompanied the students on their visit. major functions of the firm. Peter and Jordan with a presentation laying out their targeted The group began their week the then led a panel of their colleagues, which services and an outline of the broader morning of January 12th with a tour of the touched on the role of a boutique investment boutique investment banking landscape. A New York Stock Exchange. Joe Vencil ’85 banking analyst. panel of current analysts followed, where hosted the group on behalf of Albert Fried & Next, students made their way south to students learned about the various benefits of Company, a specialist, institutionally centric, Deutsche Bank, where they were hosted for a generalist analyst program. trade execution firm. Students received a lunch by Alan Delsman’68, Head of Credit Next, Kevin Collins, Client Portfolio brief tour of the Exchange’s museum and Risk Management for the Americas. He was Manager at Alger, delivered a presentation then walked the floor in small groups. They joined by Rich Ferguson ’81, Chief Risk on the strategy of a research-driven asset even witnessed a live broadcast of CNBC’s Officer for the Americas, Debbie Jones’01, manager, as well as explained the intricacies “Squawk Box.” VP Equity Research, Steven Limandibhratha of the firm’s managerial structure. Mr. The trip to the New York Stock ’14, Risk Analyst, and Zain Jamal ’10, Credit Collins also gave a comprehensive overview Exchange was followed by a visit to ITG Risk Analyst who specializes in Real Estate. of the asset management space. (Investment Technology Group, Inc.), an The hosts delivered a firm-wide overview Students then visited J.P. Morgan, where electronic broker and independent research and presented various opportunities for a panel discussion overviewed the various firm. Bob Gasser, ITG’s President and young professionals within the bank. A panel functions of the financial services giant. Dana CEO, addressed students on the importance discussion followed. The discussion provided Staley ’12 gave insight into working in the of investing in talented youth within ITG a clear perspective of working in risk and investment banking division, while Merriel and the evolving functions of a research- equity research at a large global investment Foster ’14, and Managing Directors Susan focused brokerage firm working in an bank. A strong emphasis was placed on the Adamsen ’81 and Leslie Lassiter SCR ’79 increasingly competitive space. Following advantages of working at a truly introduced the private bank. The panel spoke Gasser’s remarks, students posed questions multinational corporation that values to the everyday duties of their positions, as to a panel of young professionals operating working abroad. well as the benefits of working for a well- across the company in everything from sales Following a quick stop at Wall Street’s integrated investment bank that performs a to analytics. iconic bull statue, students received a tour of wide range of functions. The group then traversed West Street to Bloomberg’s remarkable office space. The Wednesday’s last firm visit was Millstein visit Goldman Sachs. Alumni working across strikingly open construction allowed the & Co., a boutique investment bank with a many roles delivered a well-rounded group to intimately observe the interworking unique focus on restructuring. Ali perspective on working in financial services. of the information giant. After the tour, Abramovitz ’12 and Managing Director Christine Mann ’87 spoke to the firm’s Justin Sheen’03 met the group on the top Bradley Hayes gave group presentations Private Wealth Management business and floor, where he spoke to his plethora of roles before the students broke into smaller groups was joined by Andy Kaiser P’13, Chief at Bloomberg from within one of the to speak with both junior and senior bankers. Operating Officer of Goldman Sachs Bank. building’s only non-glass conference rooms. Wednesday concluded with an alumni Kaiser reflected on his various roles within Students made their way to Rockefeller networking reception at the Princeton Club. the bank over the past 20-plus years, Plaza to visit Lazard, where they were hosted The packed event allowed students to including his time securitizing disaster risk, by Cav Walters ’13, and Sam Kaplan POM acquaint themselves with many alumni from and the role of a Goldman Sachs Partner. ’15. The visit consisted of an extended panel the New York City area. Andrew Cosentino ’11, Andrew Duckworth discussion that touched on the merits of ’12, Patricia Ingrassia ’13, and David Alvillar working in boutique banking, as well as the See NYC Networking Trip on page 4 4 THE FINANCIAL ECONOMICS INSTITUTE

In the afternoon, students had the The 2015 New York Networking Trip NYC Networking Trip from page 3 opportunity to meet with Ivan Zinn ’96, the was a great success. Many of the students founding partner and Chief Investment spent their final day in the city interviewing The final day of the trip began with an Officer at Atalaya Capital Management. Mr. with some of the 14 firms visited earlier. early morning visit to Morgan Stanley, Zinn spoke to his experience starting his The scads of professional experience, hosted by Ben Kraus ’11. Students learned own firm, discussed the value of investing in coupled with the personal contacts about the firm’s securities division and asked credit opportunities, and offered advice developed during the firm visits and evening questions about the roles and about a career in both and in social events, will absolutely benefit students responsibilities of a trader working at a the financial services industry. in future endeavors. bulge bracket bank. Finally, the students visited Credit A great deal of thanks must be extended Next, the group visited BNP Paribas Suisse where Meg Nunnally ’03 led a panel to the Robert Day School of Economics and where students were treated to a presentation discussion with representatives from the Finance, the Financial Economics Institute, by Chris Innes ’92 and Justin Eskind ’11. firm’s investment banking, securities, the CMC Alumni and Parent Relations Justin provided students with an overview of research, and private banking divisions. Office, the CMC Alumni Association, the his day-to-day roles as a trader while Mr. Students learned about the various career RDS Advisory Board, and the many alumni Innes commented on the current equity opportunities within the firm and garnered hosts at the various firms for their generous trading environment and fielded questions valuable insight into navigating the contributions that made this trip possible . ▲ about his unique path in finance. recruiting process. CLAREMONT MCKENNA COLLEGE 5

Financial Economics Institute Spring 2015 Student Research Analysts During the Spring 2015 semester, twenty-three students were hired to work for the FEI. The following is a list of the students, their roles at the Institute, or the topics of their research projects and their faculty advisors:

GABRIEL AYALA ’16, Building Regional and Industry Segment Equity ANANT JAITHA ’17, Relevant vs. Reliable Information Disclosure and Indices for California , with Professor Joshua Rosett, and he was also the Investor Reaction , with Professor Ananda Ganguly Excel tutor NINA KAMATH ’16, FEI website RA AVIV CASPI ’16, Building Regional and Industry Segment Equity Indices CHRISTIAN KELLY ’18, Understanding the Nature of Daubert Challenges , for California , with Professor Joshua Rosett, and he was also the with Professor Eric Helland Python tutor and programmer MIN JUN “MJ” KIM ’15, Examining the Effects of Football Club AMBERISH CHITRE ’18, Understanding the Nature of Daubert Ownership on Share Prices: Evidence from China and Korea , with Challenges , with Professor Eric Helland Professor Richard Burdekin JAE SUNG “JASEN” CHOI ’18, Relevant vs. Reliable Information BENJAMIN LAWSON ’15, Market Efficiency and the Dissemination of Disclosure and Investor Reaction , with Professor Ananda Ganguly Public Information , with Professors Mitch Warachka and Marc JESSE CRABTREE ’16, Physiological responses to movie trailers as a Weidenmier predictor of sales: An economic model for movie revenues , with Professor EDWARD LEATHERS ’15, Congressional Insider Trading: Should We Be Paul Zak, Claremont Graduate University Concerned? , with Professor Eric Hughson RACHEL DOEHR ’16, Investigating the Role of Ideology in Appellate Court IRIS LIU ’16, Understanding the Nature of Daubert Challenges , with Decisions , with Professors Eric Helland and Cameron Shelton Professor Eric Helland MATTHIEU HAFEMEISTER ’17, Credit Default Swap Trading and ANDREW NAM ’15, Stata tutor Internal Capital Markets , with Professor George Batta HANNAH OH ’16, FEI website RA ALEX HWUNG ’16, Understanding the Nature of Daubert Challenges , CAMERON WHITING ’15, Building Regional and Industry Segment with Professor Eric Helland Equity Indices for California , with Professor Joshua Rosett and he was AMY INGRAM ’17 , Credit Default Swap Trading and Internal Capital also the Bloomberg tutor Markets , with Professor George Batta ALBERT XU ’16, The Term Structure of Stock Required Returns , with MICHAEL IRVINE ’16, Understanding the Nature of Daubert Challenges , Professor Gary Smith, Pomona College with Professor Eric Helland SOYEON “NIKKI” YEA ’15, Financial Flows and Payments Adjustment CHRISTOPHER JACKSON ’17, Physiological responses to movie trailers as a in a Mixed Exchange-Rate Regime , with Professor Sven Arndt predictor of sales: An economic model for movie revenues , with Professor Paul Zak, Claremont Graduate University

Back row, from left: Alex Hwung ’16, Matthieu Hafemeister ’17, Anant Jaitha ’17, Amberish Chitre ’18, Gabriel Ayala ’16, and Michael Irvine ’16. Front row, from left: Iris Liu ’16, Ed Leathers ’15, Cameron Whiting ’15, Aviv Caspi ’16, Jesse Crabtree ’16, and Amy Ingram ’17. 6 THE FINANCIAL ECONOMICS INSTITUTE

Claremont Finance Conference By Philip Crawford CMC ’15 and SIF Chief Executive Officer (2014-2015)

CLAREMONT MCKENNA COLLEGE, panel discussions. The first panel Scripps College, and Pomona College focused on Equity Investing under collectively hosted the Seventh Annual today’s frothy market conditions. Claremont Finance Conference on February Panelists represented a variety of 13, 2015. The conference was organized by firms and levels of experience: Tony strategic members of the Student Investment Brenner (CMC P’17), Managing Funds of these colleges. The CFC was co- Partner at Pivot Point Capital; Todd sponsored by CMC’s Robert Day School of Barker (CMC ’01), Managing Economics and Finance, the CMC Alumni Director at Citadel Investment Association, the CMC Development Office, Partners; Brad Heaton (CMC ’09 M and the Financial Economics Institute. ’13), Managing Partner at Heaton This year, we selected “Investing at Capital Management; and Ben Market Highs” as the conference theme and Herrick (CMC ’04), Senior Don Gould ’79 Pomona invited a host of leading alumni and industry Investment Analyst at del Rey Global. professionals to provide their perspectives on The panel was moderated by CMC the industry. The theme this year was Professor Eric Hughson. designed to be narrow enough to provide a A short networking reception specific focus for discussion, but broad was held before the second panel, enough to allow alumni from many different which focused on Alternative sectors of the investing world to participate. Investing. Panelists included: Mark Alumni representing , private Robles (CMC ’78), Principal at Alta equity, portfolio management, trading, and Pacific Wealth Management; Gavin hedge funds all participated in the conference Teo (CMC ’03), Principal at Comcast and lent their perspective on current market Ventures; and Mike Widmann (CMC conditions to a diverse array of students from ’10), Senior Associate at Silver Lake across the Claremont Colleges. Partners. The talk was moderated by The conference began with lunch in CMC Professor Murat Binay. Shaw Wagener ’81 CMC the Marian Miner Cook Athenaeum at Conference attendees then CMC. Don Gould (POM ’79), President transitioned back to the Athenaeum audience and met attendees after the and Chief Investment Officer at Gould for a networking and cocktail reception. conclusion of the conference. Asset Management, spoke about efficient Following the reception, dinner was served Connor Stastny ’17, an analyst in the markets and his personal approach to and Shaw Wagener (CMC ’81), Chairman at CMC Student Investment Fund, was investing. He also spoke about the Capital Group International and CMC especially impressed by Keynote Speaker emotional side of working with his clients Trustee, delivered a keynote presentation Shaw Wagener. Stastny commented that it and how to help them navigate through entitled, “Longer Term Perspectives of was “fantastic getting to speak with Mr. both bull and bear markets. Market Tops and Bottoms Providing Context Wagener and learn about his years of Attendees then transitioned to CMC’s to Emerging Markets Today.” Following the leadership in international investing. We Freeberg Forum at the Kravis Center for two talk, Wagener answered questions from the share a strong passion for investing and the opportunity to meet an industry leader of his stature was amazing.” Connor also stated that he thought both conference cocktail receptions provided the students and alumni great opportunities to network. This year’s conference had a great turnout, and conference organizers received a lot of positive feedback. Conference organizers said they have high hopes that, in the future, the conference will include more participation from every college in the Claremont Consortium. The conference has grown tremendously over the past seven years and organizers are determined to continue improving the conference every year. ▲ CLAREMONT MCKENNA COLLEGE 7

FEI Affiliated Faculty Research Selected 2014-2015 publications by faculty members affiliated with the FEI: u Evolving Patterns in Global Trade and Finance , Sven W. u Standard Deviations: Flowed Assumptions, Tortured Data, and Arndt, World Scientific Studies in International Economies 39, Other Ways to Lie with Statistics , Gary Smith , World Scientific Publishing Co. Pte. Ltd., Singapore, 2015 Overlook/Duckworth, New York, 2014 u “Transfer Spending in the English Premier League: The Haves and u “Why Are Some Home Values Resistant and Others Resilient?,” the Have Nots,” Richard C.K. Burdekin with Michael Franklin, Gary Smith , International Real Estate Review , 17 (2), 2014, 223-240 National Institute Economic Review , Vol. 232 (May 2015), in press u “Great Companies: Looking for Success Secrets in All the Wrong u “Assessing the Impact of the Chinese Stimulus Package at Home Places,” Gary Smith with Gabrielle Baum, Journal of Investing , and Abroad: A Damp Squib?,” Richard C.K. Burdekin with Marc forthcoming D. Weidenmier , China Economic Review , Vol. 33 (April 2015), pp. u “Frog in the Pan: Continuous Information and Momentum,” 137-162 Mitch Warachka with Z. Da and U. Gurun, Review of Financial u “Tiananmen Square 1989: The View from Financial Markets,” Studies 27, 2171-2218, summary is to be published in Finance and Richard C.K. Burdekin with Li Xinzhu, Applied Economics Letters , Accounting Memos (FAMe) Vol.: No. 2 (January 2015), pp. 141-147 u “Are Hard Pegs Ever Credible in Emerging Markets? Lessons from u “Bank Lending Margins in China and the Effects of the June 2012 the Classical Gold Standard,” Marc Weidenmier with Kris Liberalization,” Richard C.K. Burdekin with Ran Tao, Journal of Mitchener, Journal of Economic History , forthcoming International Commerce, Economics and Policy , Vol. 5, No. 2 (2014), 19 u “Measuring Power and the Rise of East Asia,” Thomas Willett pages [doi:10.1142/S1793993314500033] with Eric Chiu in Benjamin J. Cohen and Chiu, eds., Power in a u “Everything’s Bigger in Texas Except the Medmal Settlements,” Changing World Economy: Lessons from East Asia , Routledge, Eric Helland with Tom Baker and Jon Klick, Connecticut Insurance 2014 Law Journal , forthcoming u “Fixed Exchange Rates and Financial Markets as Sources of u “Medical Malpractice Reform: Noneconomic Damages Caps Macroeconomic Disciplines,” Thomas Willett with Eric Chiu and Reduced Payments Fifteen Percent, with Varied Effects By Stefanie Walter in Thomas Oatley, Ed., Handbook of Specialty,” Eric Helland with Anupam B. Jena and Seth Seabury, International Monetary Relations , Edward Elgar, 2014 Health Affairs , October 2014 u “The Political Economy of the Euro Crisis: Cognitive Biases, u “Stock Ownership and Patterns of Recusal in Federal Courts,” Eric Faulty Mental Models, and Time Inconsistence,” Thomas Willett Helland with James Anderson, Georgetown University Law Review , with Nancy Srisorn, Journal of Economics and Business , forthcoming forthcoming u “Egypt’s Exchange Rate Policies After the Float,” Thomas Willett u “Bias in the Legal Profession: Self Assessed versus Statistical with Ali Massoud, International Journal of Social Science Studies , 2014 Measures of Discrimination,” Eric Helland with Heather Antecol u “News and the Behavior in the Korean Stock Market during the and Deborah Cobb-Clark, Journal of Legal Studies , 43(2): 323-357, Global Financial Crisis,” Thomas Willett with Yoonmin Kim, 2014 Korea and the World Economy , December 2014, pp. 395-419 u “Tort Reform and Physician Labor Supply: A Review of the u “How Common Are Capital Flow Surges? How They Are Evidence,” Eric Helland with Seth Seabury, International Review of Measured Matters A Lot,” Thomas Willett with M. Crystalin, et Law and Economics , forthcoming al., Open Economies Review , forthcoming u “Why expertise is important for the detection of abnormal u “Are Credit Ratings Relevant in China’s Corporate Bond Market?,” performance: the hot hand strikes back,” Eric Hughson with Chris Fan Yu with Raghav Dhawan, Chinese Economy , 48(3), pp. 1-16, Leach and David Frame, Journal of Accounting, Auditing and Finance , 2015 forthcoming u “The Neural Inhibition of Learning Increases Asset Market u “Are Public Equity Markets Declining in Importance?” Joshua Bubbles: Experimental Evidence,” Paul Zak with L. Efremidze, G. Rosett and Richard Smith, Journal of Applied Finance , (2014) Vol. Sarraf, and G. Miotto, Journal of Behavioral Finance , in press 24, No. 1:6-13 u “Neuromanagement: Using Neuroscience to Build High u “Disclosure-derived Financial Statement Adjustments in Equity Performance Organizations,” Paul Zak , P. Balthazard and D. Valuation,” Joshua Rosett with George Batta and Ananda Waldman, Eds., Organizational Neuroscience , Emerald Ganguly , Review of Pacific Basin Financial Markets and Policies , Vol. Publishers, forthcoming 17, Issue 2 u “Why Trust Matters,” Paul Zak , Ivey Business Journal , in press u “Risk Taking in Competitive Settings: Evidence from Match Play Golf Tournaments,” Janet Kiholm Smith with Serkan Ozbeklik , Journal of Corporate Finance , forthcoming 8 THE FINANCIAL ECONOMICS INSTITUTE

Congratulations Class of 2015!

THE FINANCIAL ECONOMICS companies in the M&E industry. It also uses bills between Claremont and La Verne are Sequence is part of the Robert Day School of this data to investigate the extent to which associated with the differences in the house Economics and Finance. The curriculum of different factors influence the acquirer prices between Claremont and La Verne. In the Sequence is designed for students announcement effects. These factors include: doing so, it also provides an estimate of the interested in pursuing careers in the financial the type of financing used for the deal, recent price discount faced by houses in Claremont sector and/or graduate education in mega-merger failures in the M&E industry, due to the water rate.” economics, finance, and related fields. M&A strategy (expansion vs. diversification), The Sequence has a rigorous as well as target size, country, and sub- CHRISTIAN MKPADO, The Effects of El Nino quantitative focus and is designed to industry. The results show that none of these and La Nina Weather Events on Corn Futures complement majors in economics, factors have a significant impact on Prices economics-accounting, and mathematics, as announcement effects.” (Part of Introduction): “The following well as dual majors having an economics paper will analyze the effects of the El component. In addition, the Sequence is PITRA HARUN, Founding-Family Ownership Nino and La Nina weather patterns on complementary to the coursework required and Firm Performance: Evidence from corn futures prices. The Effects of El Nino for the undergraduate Robert Day Scholars Indonesia and La Nina Weather Events on Corn Futures Program, and prepares students for the “In my study, I examine the relationship Prices , stemmed from my interest in Master’s Program in Finance of the Robert between founding family ownership and firm agricultural economics, and how the Day School. Under the auspices of the performance. Using publicly listed changing environment will affect mankind’s Financial Economics Institute (FEI), students companies in Indonesia, I observe families ability to produce the necessary food to complete the Sequence, which is noted on are much more prevalent than in the US; in survive. Recently, California has been hit the transcript, thereby attesting to their solid my sample, families are present in over 60% with one of the longest and most severe understanding of the discipline. of Indonesian listed companies and families droughts in the state’s recent history. With We had eleven FES seniors who own an average outstanding equity of mandatory water restriction now in effect, I graduated during the 2014-2015 academic 50.4%. Contrary to previous literatures, I was curious to understand how the year. Four of these seniors gave their FES present new evidence to show founding country’s food supply would be affected by oral defense presentations at the end of the family ownership and control is a more adverse farming conditions.” Fall semester and seven at the end of the efficient form of ownership structure only Spring semester. In order to receive the when the family is a majority-shareholder in BARUN ROYCHOWDHURY , Do Internal Financial Economics Sequence notation on the company. Additional investigation shows Funds Play an Important Role in Financing their transcript, students must complete a that founding family ownership has a U- Decisions for Constrained Firms? major research project in the area of financial shaped quadratic relationship with firm “In this paper, I discuss the importance of economics, the project may be the student’s performance, indicating that an increase in internal funds for corporate investment senior thesis, and make an oral presentation. family ownership is initially associated with among financially constrained firms. I use the We would like to announce that Joshua worsening firm performances, but is then paper ‘Financing Constraints and Corporate Thomas wrote the Best Thesis in Financial associated with improving firm Investments’ by Fazzari, Hubbard and Economics for 2014-2015! Congratulations! performances after passing a certain level of Petersen as a base for my framework. I focus The following is a list of the students equity ownership.” on a specific paper refuting their findings and who made their presentations this semester their response in order to fully understand along with the titles of their senior theses VALERIE HO, An Analysis of Water Rates and the benefits and costs of the framework. I and the Abstracts of their theses: Home Prices: A Case Study then apply the original framework to a recent “The issue of the rising Claremont water sample that covers the Great Recession to MOHAMAD ABDUL-RAHIM, M&A in M&E: rates has been a heated topic of debate over see the results of the initial paper are still Acquirer Announcement Effects of Mergers & the last couple of years. This study is part of valid today and if the recent recession and Acquisitions in the Media and Entertainment a larger body of literature that seeks to elongated recovery had an even more adverse Industry determine the extent to which a location- effect on financially constrained firms than “This paper uses event study methodology to specific amenity or dis-amenity is capitalized was previously noted.” present evidence that acquirer announcement into housing values, and specifically aims to effects for mergers and acquisitions (M&A) examine the relationship between water rates JOSHUA THOMAS, 10b5-1 Plans and in the American Media and Entertainment and home prices in Claremont. To do this, it Earnings Management by High-Level (M&E) industry are insignificant. In order to uses houses in La Verne, where water rates Executives reach this conclusion, this paper both have not been rising as rapidly, as a control “Using historical firm financial and insider examines existing literature on the topic and group. Specifically, the regression model manipulates available data on public looks at whether the differences in the water See Class of 2015 on page 9 CLAREMONT MCKENNA COLLEGE 9

unlikely to engage in earnings management have a consistent relationship with market Class of 2015 from page 8 through highly scrutinized means such as performance. I find a statistically significant trading information, this paper examines accruals. An interpretation of these results is relationship between returns to the market whether high-level insiders manipulate that high-level executives may be using and the level of systematic risk for a given earnings ahead of their own 10b5-1 equity 10b5-1 plans as an offensive tool to trade REIT. During periods where monthly S&P transactions. The empirical evidence suggests with the knowledge of inside information, returns outstrip those of the 30-day tbill, that high-level executives appear to which appears to be in direct opposition to REIT betas are lower. Of the 11 largest manipulate earnings through real activities the defensive mechanism that 10b5-1 plans REITs, 9 have this behavior. When using a such as abnormal discretionary expenditures are intended to represent.” fama-french model, however, this and abnormal cash flows from operations to relationship is no longer statistically influence equity prices ahead of their own DAVID TSE, Conditional Systematic Risk of significant, seeming to indicate that REIT transactions under Rule 10b5-1. Evidence Equity Real Estate Investment Trusts betas are affected by small-stock or value- also suggests that executives appear to be This paper examines whether REIT betas stock effects. ▲

Lessons from the Financial Crisis of 2008: Are We Safer Today? By Randall S. Kroszner

AS PART OF THE U.S. Financial Markets: Reflections Before and Beyond Dodd- Financial Economics Institute Frank appeared on the Washington Post’s “Book World” political Speaker Series, Professor bestsellers list. Kroszner’s paper on corporate ownership won the Randall S. Kroszner spoke at the Brattle Prize for best corporate finance paper in the Journal of Athenaeum on February 12, Finance . He has served as Editor of the Journal of Law and Economics 2015 about the financial crisis and has been on the editorial boards of numerous academic and that began in 2008 and its policy journals. His research interests include financial crises, aftermath. Kroszner is the monetary policy, regulation of financial institutions, risk Norman R. Bobins Professor of management, debt restructuring, and corporate governance. Economics at the University of Professor Kroszner is a much sought-after commentator in the Chicago’s Booth School of international media. He provides advice on economic, monetary, Randall S. Kroszner Business. He was an financial, and regulatory outlook and strategy for financial undergraduate at Brown and received his Ph.D. from Harvard. institutions, government organizations, and central banks From 2001 to 2003, Professor Kroszner was a member of the U.S. throughout the world. He is on the World Economic Forum’s President’s Council of Economic Advisers (CEA), where he was Global Agenda Council on the Global Financial System and is involved in issues ranging from sovereign debt restructuring to involved with Gates Foundation initiatives on promoting access to terrorism risk insurance to IMF reform. From 2006 to 2009, he financial services for the poor in emerging market countries. served as a Governor of the U.S. Federal Reserve System. He Professor Kroszner’s presentation provided both a clear chaired the Fed’s committee on Supervision and Regulation and summary of the workings of the banking and housing mortgage the committee on Consumer and Community Affairs. In these sectors in the U.S. and global economies, and an interesting capacities, he took a leading role in developing responses to the analysis of what went wrong as the interconnections between financial crisis and in undertaking new initiatives to improve institutions and lack of transparency regarding risks associated with consumer protection and disclosure for credit cards and mortgages. instruments such as mortgage-backed derivative securities He represented the Fed on the Financial Stability Board and the combined to produce the downward spiral in late 2008. He also Basel Committee on Banking Supervision, and chaired the OECD discussed several strategies for reform outlined in the book noted working party of deputy central bank governors and deputy finance above, but warned that we are far from understanding the forces ministers on international macro policy. that caused the crisis and implementing policies that ensure Professor Kroszner has more than 100 publications. His recent stability going forward. book co-authored with Nobel laureate Robert J. Shiller, the Arthur This Athenaeum talk was co-sponsored by the Lowe Institute M. Okun Professor of Economics at Yale University, Reforming of Political Economy and the Marian Miner Cook Athenaeum. ▲ 10 THE FINANCIAL ECONOMICS INSTITUTE

Where Will FEI Students Be Working?

CONGRATULATIONS TO THE FOLLOWING SENIORS AND JUNIORS COMPLETING THE FINANCIAL ECONOMICS Sequence who have notified the FEI that they have secured a full-time job. This list identifies the students’ major(s) and their place of employment. Graduating Financial Economics Sequence Financial Economics Sequence Juniors – Summer Seniors: Positions:

ELAN BERNSTEIN, Economics/Mathematics, LEK Consulting (San VICTOR CHAN, History, Bank of America Merrill Lynch (Century Francisco, CA) City, CA) BRADEN CROCKETT, Economics, Matthews Retail Group CAROLINE COUNTS, Economics-Accounting, Ernst and Young (San (Manhattan Beach, CA) Francisco, CA) PITRA HARUN, Economics, Bain & Company (Jakarta, Indonesia) RACHEL DOEHR, Economics, Goldman Sachs (New York, NY) CHUN YIN “BORIS” LO , Economics, Goldman Sachs Asset JAMES INGRAM, Economics, Dimensional Fund Advisors (Santa Management (Hong Kong, People’s Republic of China) Monica, CA) CHRISTIAN MKPADO, Economics, The Consulting Group GAVIN MACKINLAY, Economics-Accounting, Tableu Software (Los Angeles, CA) (Seattle, WA) T. CONNOR SCHLEGEL, Economics, Gran Ciudad, Black Creek SEAN SAKAGUCHI, Philosophy, Politics & Economics/Economics- Capital (Mexico City, Mexico) Accounting, Millstein & Co. (New York, NY) JOSHUA THOMAS, Economics, Optiver (Chicago, IL) ANDREW SOVA, Economics, T remblay Financial (Santa Barbara, CA) DAVID TSE, Economics-Accounting, Goldman Sachs (San GABRIEL SUNGA, Economics/Mathematics, JMP Securities (San Francisco, CA) Francisco, CA)

Upcoming Events

3rd Annual Southern California Finance New York City Networking Trip Conference JANUARY 10–15, 2016 SEPTEMBER 25-26, 2015 CMC students will visit prestigious firms in NYC to By Invitation Only gain exposure to various job opportunities in the financial markets and to establish relationships with CMC alumni working at these companies. Applications for the trip will be available in Bauer Center 321 in September, 2015.

Bauer Center, Room 321 500 East Ninth Street Claremont, CA 91711-6400 Phone: (909) 607-0042 Fax: (909) 607-0088 E-mail: [email protected] Website: http://www.claremontmckenna.edu/fei/

VISIT OUR WEBSITE AT: http://www.claremontmckenna.edu/fei/ The Exchange newsletter is published by the Financial Economics Institute at Claremont McKenna College.