When I teach investments, there's always a section on market efficiency. A key point I try to make is that any test of market efficiency suffers from the "joint hypothesis" problem - that the test is not tests market efficiency, but also assumes that you have the correct model for measuring the ben ... Read more

I'm teaching Corporate Finance again this semester. In the class, we spend a fair bit of time on the CAPM (yes, I know - it's not perfect. But it is a still pretty good). One of the big issues is what to use as the Market Risk Premium (or, as it's sometimes called, the "Equity Risk Premium). Looks ... Read more

Here's a paper by Bradford Cornell that I've had in my in box for a while. It's titled "Investment Research: How Much Is Enough?" Here's the abstract Aside from the decision to enter the equity market, the most fundamental question an investor faces is whether to passively hold the market portfolio ... Read more

I recently signed up to ride in my first "Metric Century" - a 100 kilometer (that's about 62 miles for those of you who don't speak metric) bike ride. Fittingly, it's a fund-raiser for the Hole In The Wall Gang Camp. The Hole In The Wall Gang Camp was started by Paul Newman (yes, that Paul New ... Read more

The Unknown Family went to the Unknown Sister-in-Law's family's house in an adjacent state (their youngest daughter is going off to college, and Unknown Wife wanted to see her before she leaves for the Big Adventure). So, I got a couple of days to myself. Nothing very exciting - I've been grinding d ... Read more

I'm in the process of putting together material for my Advanced Corporate Finance class. Of course, it has a module on capital structure and payout policy. One of concepts we'll get across is that holding extra cash often gives managers incentives to invest in negative NPV projects (the old "free ca ... Read more

Nuff said. ... Read the full post ... Read more

In any class, there are some sections that take up valuable class time but are only needed by some of the class. For example, in my case course, some of the students have a very good grasp of how to use their business calculators. In contrast, others somehow made it out of the introductory class wit ... Read more

Every year, Beloit college publishes its "Mindset List." This list is updated annually to reflect what the latest crop of incoming freshman has experienced. Here are some of my favorites: 12. The KGB has never officially existed. 13. Text has always been hyper. 18. They have never understood the ... Read more

Today is the day they give out results for the Level 2 and Level 3 CFA exams. Looks like pass rates for the Levels 2 and 3 exams were lower than their historical levels. To all who passed, congratulations - you're now one step closer to finishing the process. If not, here's some perspective from ... Read more