Good link on LTCM

http://www.faculty.econ.nwu.edu/faculty/witte/mb/handouts/ltcm.html

read what Cramer says....sort of what we talked about in class. Except thatthey were not good. I disagree.

Ripken Baseball

Jim Arnold lost his voice and was forced to cancel his presentation on Friday. He has graciously agreed to reschedule it for 1:30 on Monday May 2 in Murphy AUD C.

It will be good! Hope to see many of you there!

Power Vista Link

link to the Power Vista (for 5 week class)
http://www.nypa.gov/vc/niagara.htm

Ripken representative to speak

This Friday (April 29th) at 1:30 in Murphy Aud C, Jim Arnold of Ripken management (yes CAl Ripken;s company!) is speaking on the business of Minor League Baseball. It should be fascinating. I definitely recommend attending.

While some of the talk will be more geared towards sports marketing, I know he has also worked on investor presentations, financing, and acquisitions so finance will be well represented.

Jim is a 2004 MBA (you may know him as "Kentucky").

Salary.com

Salary.com has some advice for those on the job market. It is sort of biased, not bad. It lagrley deals with negotiation of a salary etc.

AOL Find a Job--7 Salary Myths for the Classs of 2005

5 week class "stuff"

I have not looked at the exams yet :) relax....I am sure you did better than you think.

Just to make sure we are on the same page. This Friday we will do BOTH Springfield Power and Adelphia. On Saturday we will do LTCM. Then on Next Friday we will the Nat West Case.

Also here is the link I promised to the Shake Sound Board.

have a good week!

From the Dean on finals

Mike Fischer just sent the following. It might interest you.

"Reading Days

Thursday, May 5th and Sunday, May 8th are designated “Reading” (or “non-exam”) Days. No undergraduate exams, classes, or other mandatory activities are to take place on these days (optional review sessions are fine).

Exam Conflicts

I know that you will be considerate of our students’ needs if they come to you with legitimate exam conflicts, particularly if the conflict was caused by a change in the time of your exam (including, but not limited to, it being scheduled at a “special” final exam time). It is our long-standing practice that students should not have to take more than two final exams in a given day. I hope that you will be understanding if a student comes to you with such a situation and asks for relief from having three exams in a day.

Final Grades

Final grades for degree candidates (undergraduate and graduate) are due to be submitted not later than 10:00 AM on Thursday, May 12^th. Final grades for all other students (undergraduate and graduate) are due to be submitted not later than 10 AM on Monday, May 16th. It is imperative that we comply with these deadlines.

Incomplete Grades

An Incomplete Grade Record form must be submitted to the Registrar’s office for each student for whom an “I” grade is submitted. Janet and Barb have copies of this form, if you need them. Please note, also, that the “I” grades must be made up before the beginning of the third week prior to the end of the following academic semester. The use of an “IP” grade is not a substitute for an “I” grade. The “IP” grade is reserved for research and other situations where the course work is planned to extend for more than one semester (e.g., a scheduled 2-semester course)."

Extra Credit Opportunity

For both the MBA 610 final (Regular and 5 week classes) and the 422 final, there will be an extra credit offer:

submit multiple choice problems (must have a through e as potential answers with correct answer marked and a quick explanation given).

If your problem is selected for the test, you

1. Get it right--or at least hopefully get it right ;)
2. Get 2 points added to your test.

You can submit as many questions as you want. (never cap an incentive based package :) )

JFQA Forthcoming Articles

JFQA Forthcoming Articles

It is too short for a FinanceProfessorblog entry, but given we just were talking about conditions for market efficiency this weekend,I figured I could put it here.

From an upcoming JFQA (Journal of Financial and Quantitative Analysis).

"Short Sale Constraints, Differences of Opinion, and Overvaluation
Rodney D. Boehme, Bartley R. Danielsen, and Sorin M. Sorescu
Miller (1977) hypothesizes that dispersion of investor opinion in the presence of short-sale constraints leads to stock price overvaluation. However, previous empirical tests of Miller’s hypothesis have examined the valuation effects of only one of these two necessary conditions. We examine the valuation effects of the interaction between differences of opinion and short sale constraints. We find robust evidence of significant overvaluation for stocks that are subject to both conditions simultaneously. Stocks are not systematically overvalued when either one of these two conditions is not met."

dates of MBA 610 finals

There has apparently been some misunderstanding of when tests are for the two on campus classes.

The final for the Monday class is Monday May 9th. The final for the Thursday class is TUESDAY May 10th.

Both tests are at normal class time.


The Hilbert final is the last Saturday starting at noon.

Finance 422 Assignment

Create a spreadsheet (excel or excel compatible) that uses the black Scholes formula to price call options.

From this also come up with the theoretical price for puts.

Once this is done, graph the various "greeks" (that is how the call price changes with the various variables.)


Due April 26, 2005

MBA 610 "teams"

Reposted with deletions...


Now that other issues have been settled (a post will follow tonight), I would like to make teh teams known.

The cases will done in week 14. Details are on the class website.

Monday Class

Team 1

Rust, Brodhead, Carucac, Fitzpatrick, Purdy

Team 2

Brtko, Brecht, DeVay, Krishnaswamy, DeHaven

Team 3

Gray, Walsh, Patenella, Arcangeli, Spaulding

Team 4

Cullen, Domboski, Neri, Phillips, Brown, Lucas

Team 5

Castenada, O’Rourke, Erickson, Tingley, Harper

Team 6

Bovee, Bradley, Fletcher, McElligot, Szymcanicz

Thursday Class

Team 1

Zimmer, Kistner, Monteleone, Stavish

Team 2

Overs, Benedict, Bilotta, Hollebeke

Team 3

Auteritano, Plants, Johnson, Reagan

Team 4

Haggerman, Shufran, Kapersky, Buttles

Team 5

Lulas, Bubbs, Gilmartin, Castro

Team 6

Warning, Denine, Tandle, Elliott

Update on the 610 test situation

First of all thank you for the many emails and instant messages that encouraged me to pursue this. While it is depressing that this situation has arisen, I am encouraged by the fact that so many of you are concerned about it and think that it is wrong.

Unfortunately the issue has not resolved itself. The parties did not come forward. So after further attempts to figure out how this could possibly have happened at random failed, I decided to fall back on statistics.

This afternoon we entered all of the multiple choice answers for everyone who took the same form as the questionable tests (and gee that was fun!--NOT). Once this was done, a correlation matrix was calculated. Because the scores are not normally distributed I will report the median rather than the mean. The median correlation was about a .27 with a standard error of about .07. The highest? Above a .96 on the exams in question. This more or less convinced me there is a problem.

After these calculations, I notified Dr. Peterson and Dean Fischer. We will meet soon to discuss the next steps in the process.

I will keep you informed.

Thanks for your patience on this important matter. Remember it is more important to get it right than to act quickly.

MBA 610 tests are corrected

Well they are done. :)

I will give you all of the details in class, but overall they were pretty good :)

I do have a few concerns however. Namely it was suggested to me that there may have been cheating on the exam.

Thus, a few comments:

1. I will "up the bounty" on evidence. There will now be a 200 point reward.
2. I am entering the actual answers of students to look for extremely high correlations of answers. However, just eyeballing it, it appears that there may be a problem with a couple of students.
3. If you turn yourself in, the punishment will be much less severe.

You have to understand, I do not want to believe that anyone cheated. My prior belief is that you are innocent. However, if I am able to prove that cheating occurred, then I will be left with no choice but to take it to the Dean and the VP of academic affairs. This will force you to retake the class (which will really screw up some of your job plans!).

So, if you did cheat, please come forward. I will be much less harsh on those who self-report.

(I learned that from the NCAA ;) )

MBA 610 Test Info

Ok, after hearing from a few of you I have decided that moving the exam would not be fair since some people have prior commitments the following week as well.

BUT before you all panic and there is an option!!! I will also offer the exam on Friday March 11th (as in 311) . This optional exam will be in Murphy Aud C from 12:31 to 3:11 (hey it must be a sign or something!).

This later time will be available for the Thursday and Monday class, HOWEVER, I will need a count before hand. Thus, if you plan on taking the test on the Friday, please notify me by noon on Monday 3/7/05. Otherwise I will assume you will be taking the exam with your class.

Also some students have requested more suggested problems to help prepare for the test following spring break:

13.6, 13.17, 13.20, 13.22
14.8, 14.4, 14.11
15.1, 15.10, 15.14, 15.17 15.21, 15.22
16.13, 16.6, 16.4, 16.8, 16.9
17.5, 17.6,

Also, take a look at the test page on financeprofessor.com:
http://www.financeprofessor.com/tests/testmainpage.html

Finally it was suggested to me that I offer a review session prior to break. Not wanting to stand in the way of students trying to learn more, I agreed. It will be at 12:30 to 1:30 on this FRIDAY (2/25/05) in Murphy C. If you are coming and are willing to take notes to put online, I am sure some of your classmates would appreciate it!

more comments on 610 class

This is TO EVERYONE in MBA 610

Whew. It appears the last blog entry did get people’s attention. While I will try to address several topics in this entry, the largest thing I want to stress is that I realize the majority of you are doing the work. Thus the last blog entry was not really aimed at you. This one is.

From the second I left class last Monday I began to think of how to say what I wanted to the class. I had much of the plan constructed before arriving home, but I wanted to sleep on it so as to not sound too harsh. Moreover, I then wanted to respond sooner but opted to wait until the whole class had a chance to see the original entry untempered by further explanation.

Why was I upset? It was not that the grades were poor. Sure I felt that you should have done better but I can live with an occasional poor performance. (and I do realize that it was Valentine’s Day and a Monday after Alumni Weekend neither of which should matter but both do). I was not even upset about people complaining about the workload. I know it is heavy. It is supposed to be. I have thick enough skin to take the criticism.

What did upset me was the fact that during the class more and more people seemed to be giving up. Essentially saying that they could not do it. This is totally false! I continue to have no doubt that you can all do this! And in fact many of you are doing it.

As you all know I love sports, so let’s talk sports for a second. The talent difference between a good team and a bad team is often very minor. What does separate the good from the bad is often attitude. It is the coach’s job to make sure that the athletes have a good attitude and are working towards a common goal.

Both good and bad attitudes are contagious. That is why some athletes with great potential are seen as “cancers” to teams. These players detract from the performances of those around them.
Classes are much like teams. When a few people give up it makes it easier and easier for others to do so as well. When one person develops the attitude that “we don’t want to do the readings”, others quickly adopt that attitude. That is why I was so upset when I saw the “I don’t care” attitude.

To those of you who think my standards (or demands) are too high, I respectfully disagree. Yes I understand that you are busy and have many demands on your time. I also realize that I might ask for more from you than other teachers, but that is because I am convinced that people who attend SBU deserve the best education that money can buy and I am equally convinced that with a bit more effort you can all amaze yourself with how much you can learn.

Many of you have paid in the vicinity of $120,000 for your SBU education. This is roughly the price of a house. Stop and think about that for a second If you were to buy a house, you would want everything to be perfect.

The same holds in the class room. You deserve the best possible education and to be held to the highest possible standards. For me to ignore the problems that were developing in class last Monday would have been paramount to me saying I don’t care and that you can not do the work.

Yes, my standards are challenging: I ask you to read a great deal; my tests are “not easy”; you have to read journal articles (at least at some level). Why? Because that is what top schools do and that is our competition.

Consider for a moment our text. We use the same text book as classes at many of the top schools in the nations. A list that includes Ohio State, Penn State, Dartmouth, Georgetown, Texas, and NYU to name a few. That is intentional. In the job market we will be held to the same standards as graduates of these fine programs. To hold you to lower standards in class is negligent.

A final thought: a coach/teacher is paid to get more out of the athlete/student than the person could alone. Almost by definition this means that I have to push you harder than you want to be pushed. In the short-run this is not much fun, but in the longer run it pays large dividends.

Ok? Let’s put last week’s class behind us (like a bad loss to a sports team) and take it as a learning experience. Going forward I ask that you work as hard as I know you can. And for my part, I will try to remember that even great teams lose an occasional game :) and this class has the potential to be a great team!



BTW I would like to thank the majority of you who took time to write. I will have more on that in a later post.

Monday's 610 comments

First of all I want to stress that this is not aimed at everyone in the class. Some of you did quite well (11 of 13 was the high) on the quiz and obviously are doing the readings. However it is equally obvious that yesterday's class left a great deal to be desired. From the quiz grades to the complaining, it may have been the first time in 4 years that I actually questioned my decision to teach at SBU and not a more research oriented university.

I will take the blame. Obviously I am not getting the point across to you that you have to do the readings and that it is not a blow off course. 12 of the 13 questions on the quiz were verbatim from the end of chapter ONLINE quizzes for the readings from this week and last. So you had access to all of the questions and answers prior to the quiz! And the performance was still that poor. I presume that the complaining (let us out of class, I do not want to do that much reading, etc) were just venting after a poor quiz, but I would appreciate you make any complaints to me priviately. Complaining in class is a quick way to turn others off to the topic as well.

However, my real concern is the quiz and not the complaints. I have a tough time concluding that you all are really doing the readings. (Well it is either that or that you really are part of a giant sandbag cartel ;) ).

Ok, so we chalk yesterday's class up to being the first time you used the clickers and the Monday after alumni weekend, and several of you were sick, tired, etc. However, what can we do moving forward? I do not want to cause panic, but I do want to warn you again that if the quizzes give you trouble, a test (which is much longer, covers MUCH more material, and has some questions that are more challenging) is going to be a bit more troubling.

I understand that all students want less work, but that is really not fair to those that do know the material to “dumb down” the class. Indeed it is not even fair to those of you who are asking for it. You deserve to be challenged. In the long run you want to be challenged.

Moreover, I am positive that you can all do this. It is not rocket science. You can do it! I mean it. I wish I could convince you of that. When I look out at the class, there are about 10 of you who are sitting with totally blank expressions, not taking notes, just sitting as if you have given up. That is totally the wrong attitude. You can do this! Indeed, many of you have done more than this in Finance 401. Or even Finance 301! And they are undergrad classes. So I know you can do it!

You are all paying a great deal for your MBA. It is my job to make that degree worth something and not just a repeat of what you had in 604 or undergrad classes. Obviously as an graduate course, it has to be more challenging than an undergrad course and as the final finance class this has to be more thorough than a introductory (604) class.

For my part went back and tried to clarify what you have to do for each class. I also want to remind you for the upteenth time that you do not have to read every word of every paper but that you only need to get the top two or three ideas from any paper. For that matter, right now I would be ecstatic if you get the top point from each reading!

Also a note to those of you are banking on "making it by" on the class curve, remember that the curve is not guaranteed. Indeed the syllabus says you need a 90% for an A. So, if I feel that you are not holding up your end of the bargain up--which will be in part evidenced by quiz grades, there will be no curve. You might want to reread that last sentence!

Just in case you think finance is not useful

Ok, so this is really simple, but I figured some of you might be interested...a real life use of finance...

done in Excel using PMT and PV functions.


looking at buying a car…four choices to pay for it

1. $500 rebate
2. 1.9% for 3 years
3. 2.9% for 4 years
4. 3.9% for 5 years

Analysis assumes a 6.22% interest rate is the opportunity cost of capital
this comes from the median rate for a new car, 20% down. (Not quite right, but close)
http://biz.yahoo.com/b/r/a.html

PV
choice 1 500


for all other choices, I assume a 20% downpayment of selling price (about 18,000)
that is borrow 14,400
downpymt of 3,600

choice 2: monthly rate = .019/12, 36 payments


($411.82) Payment
$13,492.84 PV of payments

PV of savings =14440-13,492.84 = 907.16

choice 3

($318.10) Payment
$13,486.73 PV of 48 payments

$913.27 PV of savings

choice 4

($264.55) payment
$13,611.78 PV of 60 payments

$788.22 PV of savings


So assuming the above is correct, it is choice 3...but given at least some positive Transaction Costs and desire to pay it earlier, I would probably recommend choice 2.

Fin 422 required reading on MVE frontier

I just found this. It is from a math professor at McMaster University. The paper is an excellent description of how to create a MVE frontier using Excel.

It may be a bit beyond what you are used to, but if you read it a few times, I am sure you can handle it.

Finance 422-tentative deadlines

ok, here is a preliminary outline for due dates etc. I am sure there are things I have left out but this can be our starting point.

Thursday (2/3/05) –We will also cover Chapter 6 and 7, so not as much time devoted to Index

1. Preliminary “prospectus” criteria for inclusion in index due, name of index, how it differs from other available indices
2. Website space needed—upload prospectus and excel file
   

Next Tuesday (2/8/05)—

1. list of all publicly traded WNY firms due. In class we will make group decision on questionable firms as to whether they meet criteria for inclusion.
2. List of what to include on website as well as how to design the page, ideas, FrontPage?, name etc.

By Thursday 2/10/05:

1. List of newspapers, business publications, radio stations with business shows—might want to keep the same county by county approach
2. Next version of “prospectus” due—should include a discussion of actual computation of the index, firms included, how often it will be updated, where it is available online etc.
3. Preliminary Web site

Tuesday 2/15/05—

1. Complete index—available only to class
2. Addresses and letter to be mailed to publications above
3. preliminary press release to PR dept.

Thursday 2/17/05—

1. Check backed data index to 2000 (further back if possible--but I have doubts)
2. Comparison of index to Business First index, any other local index, S&P, Dow, Nasdaq
3. directions as to how to update the index
4. Press release announcing index to faculty

Thursday 2/24/05—invite Drs. Peterson, Horan, Fischer, Sister Margaret? (OTH?, Buffalo News?) etc to class to show them??? Totally your call on this one. I really do not feel like getting dressed up, but if you want the recognition, we will schedule it.

—final version ready for mailing out to newspapers etc.