Diversification, Mutual Funds, and Economic Growth

Harry Markowitz won the Nobel Prize in Economics in 1990 for his pioneering work in elegantly clarifying the role of diversification, in reducing the investment risk. Markowitz’s contributions certainly accelerated the development of mutual funds, where a large number of small investors pool resources to invest in a large number of securities to avail the benefits of diversification. However, the idea that risk-spreading across dissimilar securities can be beneficial was already an old one! As early as 1774, a Dutch Investment Trust (a form of mutual fund) invested in bonds issued in seven European countries and by large plantations in South America to provide the benefits of diversification at low cost to a large number ... Read more

The following opinion piece appeared in Sunday, Oct. 18, 2009 edition of the Houston Chronicle in the Outlook section.

Journals that focus on academic research in marketing are teeming with ideas that might inform the current debate in Washington on buying and selling health care. As co-directors of the Institute for Health Care Marketing in the Bauer College of Business at the University of Houston, we wish more ideas from such research gained consideration. Here are a few examples:

Business decisions today are international; firms will move their operations to cut costs. At a focus group of Houston benefits managers, one participant burst into tears, having been told by her firm’s CEO that unless she brought down health care costs “you’ll be ... Read more

Negative moods signal that all is not right with the world and people use shopping as an emotional coping response. T-shirts proclaim, “When the going gets tough, the tough go shopping.” Who among us hasn’t bought something to cheer ourselves up, to relieve boredom, or to soothe a stressed-out psyche?  Why shopping?

Professor Jacqueline Kacen at the UH Bauer College of Business has found that there are three basic reasons why we use shopping to manage our moods.  Our possessions help to define who we are and to convey those self-concepts to others.  A new pair of sunglasses or a new electronic gadget allows us to create enhanced self-images that help counteract our negative feelings about ourselves.  In addition, shopping is ... Read more

Pressure on the Job

When the Houston Chronicle reported that Terry Francona, the manager of the Boston Red Sox, had to be treated by emergency personnel in the clubhouse for high blood pressure, Francona reacted to this by saying “The guy told me to relax. I said, “Are you (kidding) me? Do you watch this game?’”

This comment tells us that Francona finds his job quite stressful which, given the money and egos and expectations in professional baseball, is not surprising. But it implies even more, namely that there is no way that he can escape the pressures of his job, that they are part of being a baseball manager and really can’t be removed from the game. And yet not all ... Read more

Marketing Research Should Be Quantifiable, Professor Contends

Associate professor Niladri Syam teaches a graduate-level course in the Department of Marketing & Entrepreneurship at UH Bauer that focuses on the importance of research in the discipline of marketing. "Marketing is not only about feelings, senses and emotions," Syam said. "That’s a big part of it, but what I try to impress on (my students) is that you can measure and quantify marketing." He assigned a research project in the fall to students in the course that required them to complete a competitor positioning study for two grocery stories, using simulated data. Syam discusses this and more about his teaching methods in the above ... Read more

Accounting Professors Provide The Wall Street Journal with Academic Research on Backdating Stock Options Article

Many companies that improperly backdated stock options never confessed, according to an article published in the August 18, 2009, issue of The Wall Street Journal that cites an academic study done by two University of Houston C. T. Bauer College of Business professors.

According to the WSJ article, Associate Professor Scott Whisenant and Visiting Scholar Rick Edelson sifted through more than 4,000 publicly traded companies to find those with patterns of granting options at abnormally favorable times, often at low points for their share prices. Whisenant and Edelson concluded that 141 of the companies were highly likely to have been involved in backdating, 92 of which ... Read more

Bond Ratings and Lawsuits by Arthur Warga, Ph.D.

In the world of corporate and municipal bonds, AAA has come to denote the gold standard in safety. As the recent financial crisis makes clear for a wide variety of these and other bonds, it is not unknown for an AAA security to suffer a significant fall from grace. Not surprisingly, investors suffering losses from such securities have been known to sue the rating agencies responsible for assigning them their AAA status.

It is a little known fact that past attempts to seek redress for losses from highly rated securities that have failed to perform as expected are almost always stymied by one fact — the courts in this nation support the ... Read more