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Articles 1 - 23 of 23
Full-Text Articles in Business
Effectuation, Not Being Pragmatic Or Process Theorizing, Remains Ineffectual: Responding To The Commentaries, Richard J. Arend, Hessam Sarooghi, Andrew C. Burkemper
Effectuation, Not Being Pragmatic Or Process Theorizing, Remains Ineffectual: Responding To The Commentaries, Richard J. Arend, Hessam Sarooghi, Andrew C. Burkemper
Scholarship and Professional Work - Business
We appreciate the opportunity to respond to the provocative Dialogue pieces of Read, Sarasvathy, Dew, and Wiltbank (2016; henceforth, “RSDW”); Reuber, Fischer, and Coviello (2016; henceforth, “RFC”); Gupta, Chiles, and McMullen (2016; henceforth, “GCM”); and Garud and Gehman (2016; henceforth, “GG”), each of which makes several claims in defense of effectuation, as well as describes several ways forward in entrepreneurship- and process-related theorizing. We respond in a manner consistent with the traditional perspective in management theorizing that “good theory is practical” (Lewin, 1945), where “theory is theory” (Simon, 1967; Van de Ven, 1989) based on our discipline’s collective commitment to …
Asset Allocation, Risk Tolerance And Shortfall Risk, Steven D. Dolvin
Asset Allocation, Risk Tolerance And Shortfall Risk, Steven D. Dolvin
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Asset allocation is the biggest driver of portfolio performance, particularly over the long-term. Moreover, it also is reflective of an investor's risk tolerance. The recent financial crisis has negatively impacted investment psychology, particularly among younger investors. As a result, the so-called "Generation-Y" has over half of their assets held in cash -- a "non-earning" asset. While this is safe, there is a risk of loss in value, as cash does not even hold up with inflation. In the long-term, such an allocation means a lower retirement balance--i.e., shortfall risk. Thus, these investors have essentially traded one type of risk for …
Short Interest At High Levels, Steven D. Dolvin
Short Interest At High Levels, Steven D. Dolvin
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Short interest has been high even though the market has recovered significantly. In fact, in the wake of the recovery, short sellers have increased their positions. If they are correct, we could see a market pullback. Their short positions, however, create a large "sideline" demand, which has actually made market moves more positive in the wake of neutral news (due to short covering). See article here, Yahoo/Bloomberg.
China Looks To Add Credit Default Swaps, Steven D. Dolvin
China Looks To Add Credit Default Swaps, Steven D. Dolvin
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Credit Default Swaps (CDSs) enable investors to hedge the risk of bond (or other credit securities) default. Like any derivative, they essentially allow investors to transfer risk -- from hedgers to speculators (or even between hedgers or speculators with different exposures). See article here, Reuters.
Income And Spending, Steven D. Dolvin
Income And Spending, Steven D. Dolvin
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Normally higher incomes lead to higher spending, but recent increases in income seem to be headed into savings. This creates a mixed picture for consumer stocks. See article here, LA Times.
Conflict Of Interest In 401(K) Funds, Steven D. Dolvin
Conflict Of Interest In 401(K) Funds, Steven D. Dolvin
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Companies often hire third party administrators (TPAs) to manage their respective 401(k) plans. Some companies simply provide documentation and advice; however, other TPAs actually offer their own proprietary (in-house) funds as investment alternatives. New research () shows that these funds often carry higher fees and have lower returns, illustrating the impact of a conflict of interest. This is particularly pronounced for banks and insurance companies acting as TPAs.
The Rise Of The Robo-Advisor, Steven D. Dolvin
The Rise Of The Robo-Advisor, Steven D. Dolvin
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In response to high fees and varying levels of quality/service across traditional human advisors, new firms are transitioning to a fully automated framework. These so-called "Robo-Advisors" provide fully automated allocation and management strategies. This approach significantly reduces costs and standardizes risk-return matching strategies. See article here, CFA Institute.
Nasdaq To Acquire Ise, Steven D. Dolvin
Nasdaq To Acquire Ise, Steven D. Dolvin
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Nasdaq is set to acquire the International Securities Exchange (ISE). The combined firm will manage six exchanges, representing 38 percent of US options trading. This will surpass the CBOE, which manages about 27 percent of the option trading market. See article here, Bloomberg.
Target Date Funds And Dollar Cost Averaging, Steven D. Dolvin
Target Date Funds And Dollar Cost Averaging, Steven D. Dolvin
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Target Date Funds simplify the investment process for investors, as such funds oversee changing asset allocations through time. A secondary benefit is that with these "set it and forget it" funds, investors are less likely to try to time the market. This is good since such activity generally hurts (rather than helps) most investors. In fact, staying the course allows investors to benefit from downside market volatility, as continued investment enables investors to buy more shares at lower prices, so-called dollar cost averaging. See article here, WSJ.
Correlation Concerns, Steven D. Dolvin
Correlation Concerns, Steven D. Dolvin
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Modern Portfolio Theory (MPT) is based on the notion that diversification creates better (a.k.a., more efficient) portfolios. The benefit of the diversification stems from less than perfect correlations between asset classes. However, during times of extreme stress, and even in recent years with market integration, correlation values have increased. This calls into question whether diversification will bring the full benefit that it is expected to provide. See article here, Bloomberg.
Credit Default Swaps Signal Warning, Steven D. Dolvin
Credit Default Swaps Signal Warning, Steven D. Dolvin
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Credit Default Swaps allow investors to hedge the risk of default on underlying debt, essentially acting as put options. Recently, CDS prices on the debt of banks such as Goldman Sachs and Deutsche Bank have increased in price, signaling a larger possibility of default. Many investors view CDS prices as a barometer of faith, thereby suggesting that bank stocks are poised for further declines. See article here, WSJ.
Negative Interest Rates, Steven D. Dolvin
Negative Interest Rates, Steven D. Dolvin
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Sweden's central bank has followed other major countries and further reduced its interest rate -- making it even more negative. With negative interest rates, banks that store money with the central bank must pay to do so (rather than earning interest as would normally be the case). The goal is to induce banks to hold less money (thereby lending more and increasing economic activity). See article here, The Telegraph.
Short Covering In Oil Drives Prices, Steven D. Dolvin
Short Covering In Oil Drives Prices, Steven D. Dolvin
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Suppliers reported an increase in crude oil inventories, yet contrary to supply and demand fundamentals, prices rose. Much of this is attributed to short sellers covering their positions at what is expected to be the low point in prices. See article here, Reuters.
Yield Curve Irrelevant?, Steven D. Dolvin
Yield Curve Irrelevant?, Steven D. Dolvin
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When longer term interest rates fall below shorter term interest rates (a so-called inverted yield curve), economists generally warn of an impending recession. However, with short term rates so low, the usefulness of this indicator may be fading. See article here, Bloomberg.
Mutual Fund Fees Continue To Fall, Steven D. Dolvin
Mutual Fund Fees Continue To Fall, Steven D. Dolvin
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Passive funds have historically outperformed active funds, and much of this difference is likely driven by the lower fees charged by passive funds. A discusses the impact on both investors and the industry.
In Equations We Trust? Formula Learning Effects On The Exponential Growth Bias, Bryan Foltice, Thomas Langer
In Equations We Trust? Formula Learning Effects On The Exponential Growth Bias, Bryan Foltice, Thomas Langer
Scholarship and Professional Work - Business
This paper evaluates the possible benefits and drawbacks of the formal formula learning of compound growth as it pertains to eliminating, or at least reducing, the exponential growth bias in various household savings and debt decisions. In our main experimental study, we determine if the ability to calculate the simple compound savings formula only assists in its direct area of application with an available calculator, or if this knowledge extends into similar exponentially-based savings and debt decisions when either a calculator is prohibited or when the formula is unknown. In the process of tackling this research question, we develop a …
David Bowie: Finance Genius?, Steven D. Dolvin
David Bowie: Finance Genius?, Steven D. Dolvin
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Famous musician David Bowie just passed away. While most people remember him for his music, he is also famous in the finance area. Bowie was among the first to offer an asset-backed security, which in his case was based on future royalties from his songs. In recognition, this type of asset is often referred to as a "Bowie-bond." See article here, Bloomberg.
China Suspends Circuit Breakers, Steven D. Dolvin
China Suspends Circuit Breakers, Steven D. Dolvin
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Circuit breakers are designed to slow down (or even halt) panicked selling. However, Chinese authorities recently suspended their newly implemented circuit breakers, as they seemed to be increasing panic (as opposed to reducing it). See article here, Finance Asia.
Mutual Fund Fees, Steven D. Dolvin
Mutual Fund Fees, Steven D. Dolvin
All Chapters
As we all know, fees impact net returns. For mutual funds, aside from any load, the two primary fees charged are management fees and 12b-1 fees. The management fees are easy to understand. The 12b-1 fees, however, are not. They are designed to cover distribution costs, but this is a broad term. In reality, much of this fee is used to pay brokers/advisors for directing client business to the funds. As a recent article (Investment News) suggests, the SEC may begin to limit such payouts.
Cultural Influnces On Risk Tolerance And Portfolio Creation, Mark K. Pyles, Yongping Li, Shifang Wu, Steven D. Dolvin
Cultural Influnces On Risk Tolerance And Portfolio Creation, Mark K. Pyles, Yongping Li, Shifang Wu, Steven D. Dolvin
Scholarship and Professional Work - Business
We extend existing research that examines the impact of culture on risk tolerance. Using surveys completed by Chinese and American students, we find, consistent with previous studies, that Chinese students perceive themselves as more risk tolerant. However, we find that Chinese students are less consistent in matching their perceived tolerance levels with actual scores from a standard risk tolerance assessment. Further, we also examine mock portfolios created by the respondents and find no evidence that Chinese students create portfolios that are riskier than their American counterparts. Our findings suggest that differences in risk tolerance are at least partially a product …
Pomegranate Juice Can Do That? Navigating The Jurisdictional Landscape Of Food Health Claim Regulation In A Post-Pom Wonderful World, Hilary G. Buttrick, Courtney Droms Hatch
Pomegranate Juice Can Do That? Navigating The Jurisdictional Landscape Of Food Health Claim Regulation In A Post-Pom Wonderful World, Hilary G. Buttrick, Courtney Droms Hatch
Scholarship and Professional Work - Business
Thirty years ago, the most the consumer expected out of his or her morning glass of juice was a little extra vitamin C. By 2010, the consumer expected a lot more. POM Wonderful’s pomegranate juice, for instance, promised to improve cardiovascular health, treat erectile dysfunction, and combat prostate cancer.1 Those claims made orange juice look a little pathetic. Of course, those wild promises also landed POM Wonderful in hot water with the Federal Trade Commission (“FTC”) for misleading the public with scientifically unsubstantiated health claims.2
Banco Solidario S.A.: The Recovery Strategy, 2000–2004, Karina Caballero, Mauricio A. Melgarejo, Enrique Ogliastri
Banco Solidario S.A.: The Recovery Strategy, 2000–2004, Karina Caballero, Mauricio A. Melgarejo, Enrique Ogliastri
Scholarship and Professional Work - Business
Five years passed since, in April, 2000, Kurt Koenigsfest took over as the Chief Executive Officer at Banco Solidario S.A. (BancoSol), in La Paz, Bolivia. BancoSol had become the top Latin American bank specializing in providing microbusiness services. Since its beginning in 1992, BancoSol achieved excellent results and became an international reference in the microcredit area. In mid-2000, external and internal factors caused its performance to deteriorate. Kurt and his management team set and implemented a strategy that led the bank to be rated as the best financial institution in the Bolivian financial system in 2004. The time had come …
Taca, Pedro Raventos, Mauricio A. Melgarejo
Taca, Pedro Raventos, Mauricio A. Melgarejo
Scholarship and Professional Work - Business
The airline industry is energy intensive, has high fixed costs and its demand is very sensitive to the economic cycle. After the industry worldwide undergoes deregulation, starting with the United States in 1978, two distinct business models develop. Traditional carriers operate hub and spoke networks, offer onboard service and engage in price discrimination, whereas low cost carriers operate point to point, charge for all services and have simple tariffs. TACA begins operations in Central America in 1931 and, by 1943, has a footprint that extends from the United States to Argentina. In 1998–2001 TACA faces increased competition and a significant …