< The Finance Professionals' Post: September 2011

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18 posts from September 2011

09/29/2011

Wall Street Week: It Scares the Public to Death

In Part 1 of "It Scares the Public to Death," Wall Street Week interviews Harry Clark, President and CEO of Clark Capital Investment.  After recent market lows, Clark gives his opinion on the state of the economy. "We could avoid [another recession], but I'm not going to bet on it," he says.

 



 

 Wall Street Week brings the latest thinking from nationally recognized financial advisors, analysts, and money managers.  

09/28/2011

Career Coach: Job Search Success for the Finance Professional (Part 1)

CareerCoachFor many highly skilled finance professionals who are unemployed—notably CFA charterholders and those diligently working toward the designation—job search may feel like a never ending process. Over time, it is inevitable that questions will arise and confidence begins to wane: “Who is going to hire me? Will they want someone younger or cheaper? Is my experience growing stale?” The longer the period of involuntary unemployment, the more overwhelming these feelings have the potential to become. And as the job search lengthens, traditional search techniques seem less effective, too.

Continue reading "Career Coach: Job Search Success for the Finance Professional (Part 1)" »

09/27/2011

Investors Step Up Pressure for Integrated Reporting

We live in a world of rapid human population growth and consumption,  heightened resource scarcity, and the attendant stresses placed by all these factors, not to mention our "business as usual" economy on the earth's ecosystem.   Corporations must acknowledge this and can no longer afford to operate without closely monitoring, managing, and disclosing their environmental, social, and [corporate] governance (ESG) risks—any one of which can explode into a crisis with very material financial consequences. Asset managers who fail to require the companies in which they invest to step up to the plate and take on this responsibility are rightfully being viewed as shirking their own fiduciary duty. 

Continue reading "Investors Step Up Pressure for Integrated Reporting" »

09/26/2011

CFA Preparation: The Benefits of Study Groups

There are several benefits to preparing for the CFA exams in groups, including confidence building. Louise A. Howard, CFA, CAIA, Senior Investment Analyst for the YMCA Retirement Fund, explains here. 

09/22/2011

Nathan Ronen for NYSSA CFA Prep

Nathan_Ronen-new

 “Excellent, valuable, amazing, unique, extremely helpful”—words that are not easily spoken when referencing the CFA exam. That is, unless you experience CFA exam prep Nathan Ronen–style.

The popular instructor and CFA charterholder will return to the New York Society of Security Analysts in January 2012 as CFA® Lead Instructor to teach CFA exam prep courses for Levels II and III of the June 2012 exam. Ronen’s track record is impressive. He has been teaching CFA Levels I, II and III for over 16 years and has helped over 20,000 candidates pass the CFA exams. Part of his success is attributed to his background. He understands the pressure that candidates face, having earned a CFA charter while working in finance. “I don’t believe in merely reciting the CFA curriculum back to students. That’s not teaching the material. Candidates who have had me for Level I or Level II know that my ability to hone in on essential points and take the most difficult concepts and break them down to a simpler form is what helps them pass on exam day,” says Ronen regarding his teaching style.


CFA Prep Discount


Of course, Ronen’s strong knowledge of the financial markets, from years of working in the financial sector, is another valuable resource in his teaching style. He served as a supervisory analyst training government regulators, an accounting analyst, and a corporate finance analyst. His professional experience encompasses well-known organizations such as New York Life, NASD, and Salomon Brothers.

In addition to teaching CFA exam preparatory courses for NYSSA, he has taught for the Washington Society of Security Analysts and the Study Seminar for Financial Analysts (SSFA). Ronen has also taught in-house CFA seminars at Goldman Sachs, Merrill Lynch, Citigroup, and many other major financial institutions.

Click here for more information on NYSSA CFA Exam Prep Courses.

The Trade-offs of Your Trading System

Tradingsystem

Readers may believe that following your trading rules makes you exempt from feeling any emotions. But, unfortunately, you are human like me and your brain is built to respond to "the potential to make money" even more than the making of the money itself.

Those feelings are aligned and in business with your level of intelligence, and most of your are overly smart: you have CFAs, MBAs, and some PhDs. You have more intellectual brain power than almost all of your peers, friends, and colleagues put together, and your self-esteem is not unaware of this fact either.

And that's where it all starts to go south.

Continue reading "The Trade-offs of Your Trading System" »

09/21/2011

The Real Road to Serfdom

        The past is never dead. It is not even the past.
                    —William Faulkner (1951), Requiem for a Nun

        History is more or less bunk.
                    —Henry Ford (1916), Interview in Chicago Tribune

In June of this year, I was a presenter, discussant, and session chair at the 18th Conference of the Multinational Finance Society, held in Rome. In his keynote address, Hersh Shefrin, professor of finance at Santa Clara University and a pioneer in behavioral finance, made a desperate plea to restore historical economics to the finance and international business curricula within graduate programs. There are several arguments in favor of educating future finance professors, economic diplomats, and investment bankers in the history of economic processes: 

    • First, many practices and relationships long abandoned by developed nations still flourish in developing markets. 

    • Second, many extant laws and attitudes originated in the distant past. 

    • Finally, setting aside concepts such as quantum finance and “financial hydrogen bombs,” we find   that systemic dislocations in the financial markets have analogs in the past, for greed, fear, and gullibility have always been characteristic of our species. 

Continue reading "The Real Road to Serfdom" »

09/20/2011

Commentary: Why We Need a Financial Transactions Tax

Speculators may do no harm as bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation.

- John Maynard Keynes, Speculator and Economist

You know you’ve hit a hot button when publicly traded stock exchanges, futures brokers, and a host of bank stocks get slammed with the simple mention of a financial transactions tax ("FTT"). The market’s response is understandable – even a small transactions tax would have a significant impact on the high frequency trading and other “quant” trading strategies that now comprise an astonishing 70% of vastly bloated equity trading volume.

Continue reading "Commentary: Why We Need a Financial Transactions Tax" »

09/19/2011

Are Your CFA Study Strategies Working against You?

CFA San FranciscoIn order to pass the CFA exams, you must show you’ve mastered the material. Unfortunately many candidates follow a study strategy that severely hurts their chances of passing the exams.

TYPICAL CANDIDATE EXAM STUDY STRATEGY

  • Plow straight through the material, happily highlighting as you go.
  • Do practice questions, typically in small blocks of time and only on one study session.
  • Massive cramming in the two weeks before the exam.

Continue reading "Are Your CFA Study Strategies Working against You?" »

09/15/2011

Portfolio Heat: When Corn Starts Popping

When your portfolio heat increases too fast, too soon, you need to cut your position size(s) down to lower the overall risk to your portfolio. Else you have a Jiffy Pop portfolio.

Continue reading "Portfolio Heat: When Corn Starts Popping" »

09/14/2011

You Need to Start Seriously Grooming your Recruiter Relationships. Here Is How.

If you don’t do this now, you could regret it later. September is a comparatively quiet time of the year for headhunters and recruiters. They are milling around quietly, gently schmoozing clients and surfing the internet. In a few months they will be frantically fighting for jobs to fill in 2012 while fending off waves of the newly unemployed. If you want to get a headhunter/recruiter on your side, now is the time to do so.

Continue reading "You Need to Start Seriously Grooming your Recruiter Relationships. Here Is How." »

09/13/2011

Debate: Does Having your CFA Demonstrate Academic Ability?

Debate

The answer for many of you, especially CFA charterholders, will unequivocally be yes. Yes, it’s a grueling process; those who don’t have academic skill couldn’t do it. Yes, many don’t pass the first time around; (remember, the 10-year average pass rates for Level I, II, and III are 39%, 44%, and 59%) those without persistence, skill, and some degree of intelligence wouldn’t make it. Yes, many professors of finance and related fields have CFAs, so CFAs are clearly represented in the academic field. But, does that really mean that having your CFA is a demonstration of your academic ability?

Continue reading "Debate: Does Having your CFA Demonstrate Academic Ability?" »

09/12/2011

Book Review: Reckless Endangerment

Reckless-Endangerment Is the love of money in fact the root of all evil? Perhaps. It was overwhelming greed and overreaching ambition that led to one of the greatest economic downturns of our time, the 2008 Recession, also dubbed the "Great Recession". 

This recent financial crisis resulted in a mass demand for literature which details the facts surrounding the financial meltdown. Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led To Economic Armageddon  is the best book on the roles of major mortgage companies, Fannie Mae and Freddie Mac, who intensified the housing boom through the pursuit of loans and agressive lobbying.

Continue reading "Book Review: Reckless Endangerment" »

09/08/2011

Recent Research: Highlights from September 2011

"Contingent-Capital Solutions for Mitigating the Investment Risks of a Private Placement Stock.The Journal of Investing (Fall 2011). C.B. Garcia.

The final negotiations between angel investors and a company following a thorough due diligence usually involve the following impasse: The angel investors on one side and the company on the other are in disagreement regarding the company's valuation because the company's expectations are more optimistic than the investors'. There is no feasible solution. In this article, the author proposes a model that a mediator may use to help the two parties come to a settlement. For the model, we show why traditional instruments of equity or notes are oftentimes infeasible and how feasible solutions—solutions that are currently not considered in negotiations—may be uncovered. With this model, a mediator may at least get one side to understand the implication of the terms to his or her future ownership of the firm, the (in)feasibility of the offering, and more importantly, where the other side is coming from. Better yet, with the model, the mediator may be able to persuade the contending parties to jointly consider alternate feasible solutions, to add their own constraints, or to move their expectations (which are functions of their beliefs about capital needs, risk profiles, intellectual property, etc.) closer to each other in order to get to a quicker settlement.

"The Performance of Johnson Distributions for Computing Value at Risk and Expected Shortfall." The Journal of Derivatives (Fall 2011). Jean-Guy Simonato.

Option pricing plainly depends on the probability distribution of the underlying asset return, at least the portion of the distribution for which the option is in the money. Risk management also depends on the return distribution, but standard risk measures like value at risk (VaR) and expected shortfall (ES) concentrate only on its tails. While the lognormal may be (arguably) adequate for modeling option values, empirically, "risk" is inherently tied up with fat-tailed return processes. This result has led to interest in methods to approximate an unknown distribution by matching its first four moments. The Cornish–Fisher and Gram–Charlier expansions are frequent choices. Simonato argues, however, that these techniques do not actually work very well because the range of densities for which the approximations are valid is quite limited. For example, the density approximation may have negative portions, even when skewness and kurtosis seem quite reasonable. He proposes adopting the Johnson family of densities instead, which also uses four parameters to match the first four moments of an empirical distribution. A simulation study shows that with Johnson distributions, tail fitting is accurate and available over the full range of parameter values.

"How Do Private Equity Investors Create Value?  A Summary of Findings from Ernst & Young's Extensive Research in North America over the Past Four Years." The Journal of Private Equity (Fall 2011). John Vester.

For the past four years, Ernst & Young has conducted in-depth annual surveys in North America on the largest private equity (PE) investment exits, to enable disciplined quantitative analyses for the purpose of identifying the major drivers of investment return. The results have been published and presented regularly in various forums, and each edition of the annual E&Y PE Value Creation Study (as it has become known) delves into new areas of investigation to keep the current findings innovative and fresh. This article presents for the first time a coherent and cumulative summary of the major findings from all of the editions of this substantive PE exit research and analyses over exit years from 2006 to 2009 for the largest PE exits in North America.

"The FTSE StableRisk Indices." The Journal of Index Investing (Fall 2011). Jeremiah H. Chafkin, Andrew W. Lo, and Robert W. Sinnott.

Implicit in most asset-allocation policies is the statistical assumption of "stationarity," which means that the means, variances, and covariances of asset returns are assumed to be constant over time. This assumption is a reasonable approximation during normal market conditions but fails dramatically during periods of market turmoil and dislocation. In such periods, market volatility is highly dynamic, correlations can jump to 100% in a matter of days, and risk premia can become negative for months at a time. FTSE and AlphaSimplex Group have developed a family of rule-driven (passive), transparent, and high-capacity indices whose volatilities are rescaled as often as daily with the goal of maintaining more stable risk levels. By stabilizing the risk of each asset class over time, the FTSE StableRisk Indices have the potential to capture the long-term risk premia of asset classes and simple strategies with less severe maximum drawdowns than those of traditional indices, which have no risk controls.


NYSSA Discount on Journals

09/07/2011

Real Estate: The Bubble, the Bust, and Beyond

With a decline of 24% in U.S. home prices since its record high in March 2007, this year marks the longest real estate bear market since the beginning of World War II. There is much public debate about when housing’s problems will end and a new bull market will begin. Financial history can provide us with some important insight into the longstanding pros and cons of real estate investing and clues to its future as a popular investment choice.

Continue reading "Real Estate: The Bubble, the Bust, and Beyond" »

09/06/2011

Worldview Podcast: The Global Exchange of Workers

Worldview PodcastRichard G. Lipstein is a veteran executive search consultant and a member of Boyden’s global financial services practice, as well as currently serving as the chairman of the Career Development Committee at NYSSA. He provides insight into an interesting side-effect of globalization: the global exchange of workers.

If you want to watch the webcast of this entire event or any other NYSSA program, visit NYSSA's On-Demand website.

09/05/2011

To Pass the CFA Exam—Train for a Marathon!

CFA San FranciscoIf I told you I was going to run up the block and back to my house every day for a year and when I was done, I would be ready to run a marathon, do you think I would be successful? Of course not! But many candidates take the same approach to preparing for the CFA exams.

If your study approach resembles my marathon training scenario, you probably do problems in little chunks of time topic by topic—perhaps during commercial breaks during your favorite TV shows. I’ll agree that over a week’s or month’s time you may have actually completed a full exam. But that’s not the same as sitting down for two 3-hour exam blocks. The outcome looks to be the same but it isn’t. That’s because you are training for a sprint when you should be training for a marathon.

Continue reading "To Pass the CFA Exam—Train for a Marathon!" »

09/01/2011

Worldview Podcast: Growth Rate of Emerging Markets

Worldview PodcastThej Gurumurthy, the cofounder and COO of Syven Global Services, a research and analytics firm, points out the truth that comes with the modern, globalizing world: to succeed in business you have to be willing to look beyond US borders. Emerging markets (e.g. China, India, and even Russia) offer growth rates multiple times that of the US. 

If you want to watch the webcast of this entire event or any other NYSSA program, visit NYSSA's On-Demand website.

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