Leading a mock trading floor: Active-based learning in a business context

A master teaching approach was used during a session of introductory finance to provide high impact teaching practices for a large class of 190 freshman business students. To teach financial markets, an active-based learning activity was used, and the students participated in a simulated New York Stock Exchange trading floor. Using volunteers as market specialists, students traded fictional shares and submitted a portfolio assignment after the trading session. Active-based learning generated excitement toward meaningful student engagement about financial markets

Paying attention to social media stocks

Social media has reshaped business models, economies, politics, and culture around the world. In this paper, we identified social media stocks from various sectors by using a strict, academic definition and then studied their performance and return characteristics. Multivariate regression results demonstrate that being recognized as a social media firm yields extra return. The performance of social media stocks is not associated with macro-level sentiment, but rather with firm-level attention paid by potential investors. Causality tests indicate that the default risk premium and volatility have incremental power in explaining the performance of social media stocks

EXECUTIVE ROLES AND INSIDER TRADING

My dissertation consists of two essays related to executive roles and insider trading. The first essay examines the information asymmetry that exists between managers and shareholders. However, managers are not one homogeneous group. Information asymmetry may exist amongst managers as well. I test this hypothesis using the trades of different Executive Role Groups. I find that all managers do not trade the same, suggesting they experience a different information environment within the firm. By splitting executives into three groups, which parallels their relative positions in firm hierarchies, I document differences in purchase and sales behavior, controlling for ownership levels, firm and managerial attributes. By forming portfolios based on insider trades, these differences are born out in subsequent excess returns.Information asymmetry is likely to vary across firms in differently regulated environments or vary across time as new laws are implemented to increase disclosure. I find that reduced information asymmetry in more heavily regulated firms results in lower insider trading returns for managers as a whole. However, insiders are unequally affected by this information asymmetry with the senior and junior executives benefiting from information asymmetry while the middle role group (of predominantly financial experts) not apparently exploiting the information asymmetry.The second essay examines whether the information content of certain executive insider trades reflects different trading skill or a different willingness to exploit the information asymmetry that exists between executives and outside shareholders. I consider the information content of equity purchase activity for chief executive officers, chief financial officers and chief operating officers using portfolios based on trading activity. Using the purchase activity of chief financial officers generates significantly higher daily excess returns than using either the purchase activity of chief operating officers or chief executive officers. Superior trading profitability of CFOs suggests that they are either more skilled at trading (skills hypothesis) or are more willing to use asymmetric information (information hypothesis). I test the skills hypothesis and find no evidence that different skill drives my results. Instead, I find evidence supportive of the information hypothesis with CFOs appearing to exploit asymmetric information in their insider trading

Paying attention to student learning in principles of finance

Based on providing quicker, electronic feedback to enhance student learning, a natural experiment was used to assess the benefit of changing quizzes from in-class to online in the Principles of Finance course at a technological university in the Midwestern United States. Online homework and the course quiz average were associated with stronger final examination performance. The impact of more focused and frequent quizzes online, compared to in-class quizzes, to final examination performance was also significantly positive. No association was found between final examination performance and the following factors: student absences, gender, status as a quantitative major, or as an upper division student. Using scaffolding principles and adapting to changes in student needs is an important aspect of ensuring learning in the Principles of Finance course

Executive roles and insider trading

My dissertation consists of two essays related to executive roles and insider trading. The first essay examines the information asymmetry that exists between managers and shareholders. However, managers are not one homogeneous group. Information asymmetry may exist amongst managers as well. I test this hypothesis using the trades of different Executive Role Groups. I find that all managers do not trade the same, suggesting they experience a different information environment within the firm. By splitting executives into three groups, which parallels their relative positions in firm hierarchies, I document differences in purchase and sales behavior, controlling for ownership levels, firm and managerial attributes. By forming portfolios based on insider trades, these differences are born out in subsequent excess returns. Information asymmetry is likely to vary across firms in differently regulated environments or vary across time as new laws are implemented to increase disclosure. I find that reduced information asymmetry in more heavily regulated firms results in lower insider trading returns for managers as a whole. However, insiders are unequally affected by this information asymmetry with the senior and junior executives benefiting from information asymmetry while the middle role group (of predominantly financial experts) not apparently exploiting the information asymmetry. The second essay examines whether the information content of certain executive insider trades reflects different trading skill or a different willingness to exploit the information asymmetry that exists between executives and outside shareholders. I consider the information content of equity purchase activity for chief executive officers, chief financial officers and chief operating officers using portfolios based on trading activity. Using the purchase activity of chief financial officers generates significantly higher daily excess returns than using either the purchase activity of chief operating officers or chief executive officers. Superior trading profitability of CFOs suggests that they are either more skilled at trading (skills hypothesis) or are more willing to use asymmetric information (information hypothesis ). I test the skills hypothesis and find no evidence that different skill drives my results. Instead, I find evidence supportive of the information hypothesis with CFOs appearing to exploit asymmetric information in their insider trading

Managing risk for sustainable microfinance

Purpose The purpose of this paper is to provide an insurance framework to address the challenge of managing default risk for lenders providing credit to small and micro businesses. Design/methodology/approach A theoretical model is developed showing how mircrofinance lenders can better manage the default risks of small and micro businesses, which assists lenders in sustainably providing affordable microfinance. Findings The model explains how to determine the feasible range of insurance premiums to advise lenders on the appropriate price for microinsurance protecting against small and micro business default. This will enable microfinance institutions to better manage default risk, and thereby provide sustainable and accessible microfinance assistance to small and micro businesses. Social implications The need for microfinance is essential to support small and micro businesses. The insurance framework assists financial institutions in managing default risk of small and micro businesses, enhancing sustainability of these critical financing channels, and supporting the economic development of society in both the developed and developing worlds. The insurance framework proposed will help both policymakers and financial institutions to make better economic decisions, thereby serving small and micro businesses. Originality/value This is the first study in the area of microfinance to propose a way to solve the challenge of providing sustainable mircrofinance services and mitigating small and micro businesses’ difficulty in receiving the financial help they need

Toward understanding FinTech and its industry

Purpose The purpose of this study is to define FinTech, differentiating it from financial technology and use the definition to develop an industry framework. Design/methodology/approach Using the existing literature on FinTech and incorporating these contributions into a traditional financial structure, characteristics are outlined and placed into a framework that describes the FinTech industry. Findings FinTech is a specific type of Financial Technology, defined as technology used to provide financial markets a financial product or financial service, characterized by sophisticated technology relative to existing technology in that market. Firms that primarily use FinTech are classified as FinTech firms. Using these definitions, the paper provides a structure for the FinTech industry, classifying each type of FinTech firm by FinTech characteristics. Research limitations/implications Research that would inform the economic importance of FinTech would be served with an increased understanding of FinTech firms and the FinTech industry. Originality/value This paper contributes by defining FinTech and developing a comprehensive framework to describe the emerging FinTech industry

Why Susie owns Starbucks: The name letter effect in security selection

We examine whether security selection is influenced by the name letter effect--a psychological predisposition to select items that start with leading own name letters. Two sets of tests reveal evidence that the name letter effect influences investors' security selection decisions. First, breadth of ownership (as measured by the number of institutional investors holding the security) is positively related to U.S. name letter frequency, e.g., stocks that begin with the common name letter "M" exhibit a greater number of institutional shareholders than stocks that begin with the less common name letter "X." Second, undergraduate students managing university endowment funds are more likely to select securities for evaluation when the stock's name begins with the same letter as their name.Name letter effect Security selection Investor bias Role of emotions