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Perfectly Competitive Model and Finance: Changes in the Value of the Firm During Competitive Adjustment to a Shift of Demand
No full textThis paper explores the adjustment process of the perfectly competitive model from the perspective of finance theory and argues that finance theory (in unsophisticated form) is implicitly woven into the model’s adjustment process. Making this explicit allows students of elementary economics and finance to bring the two disciplines together
Gains from Specialization and Trade Revisited: “How” is Done and “Why” Must be Explained
No full textMost textbooks have shown mutual gains from trade without explaining the source of the gains. Formally deriving the combined PPF from two individual PPFs, this paper demonstrates that the economy of two producers reaches their combined PPF if and only if at least one of them fully specializes according to her comparative advantage. Such specialization causes the total production to rise, as it is maximized on the combined PPF. It also shows how such specialization is endogenously determined under the perfect competition. It also explains who (and how to) benefit more from specialization in international trade and in labor market
Yield to Maturity Is Always Received as Promised: A Reply
No full textThis note attempts to further spell out why it is a myth that YTM is viewed as only a promised but not really earned interest rate. It addresses some misconceptions in Shirnani and Wilbratte (2009, this issue) on what, between YTM and RCY, is a true rate of return of a coupon bond, why YTM is NOT just a “fictitious mathematical construct”, and why YTM has nothing to do with yield curve
Duration and Convexity Using Polynomial Least Squares –Some Educational Aspects
No full textWe apply polynomial least squares (PLS) techniques to the calculation of risk indicators for bonds and fixed income portfolios such as duration and convexity. These indicators can be easily obtained with few observations —three in the quadratic case, four for the cubic specification. PLS procedures can be calculated with matrix functions or with regression procedures readily available in spreadsheets. In this study we stress the educational advantages of the methodology. At the practical level, PLS procedures allow investors and analysts to calculate most important fixed income data indicators straightforwardly by simply collecting observations of market values for a bond or bond portfolio and of associated key interest rates
Does Math Confidence Matter? How Student Perceptions Create Barriers to Success in Economics Classes
No full textOne of the most common obstacles in the economics classroom is facing students’ disinclination to perform tasks requiring basic quantitative skills. Economics, relative to other disciplines, is particularly bridled by this challenge since mastery of economics requires sufficient mathematical proficiency to elicit anxiety and resistance in many students but is not widely regarded as math intensive enough to generate a selection effect of highly quantitative students. This paper attempts to measure undergraduate economics students’ perceptions of their level of “mathiness” or mathematical abilities and anxieties and then identifies the impact of those perceptions on the students’ performance in economics courses
Traditional, Online, or Flipped Classes–Which Do Students Prefer?
No full textThis paper describes the creation of a flipped classroom based on experimentation, student feedback, and an instructor’s impressions about learning outcomes. Based on 601 student responses to a survey administered between 2014 and 2018 to lower and upper level economics classes at a four-year public university, this paper finds that the majority of students preferred flipped to traditional as well as to 100% online classes. Other results indicate that students preferred watching lecture videos to reading textbooks or attending in-class lectures, and preferred weekly-structured assignments over dailystructured assignments. However, findings indicate mixed student preferences with respect to flipped mastery
Some Potential Issues with a Student Managed Investment Program at Small Liberal Arts Colleges: The Berry College Experience
No full textThis paper focuses on potential issues with student managed investment funds (SMIFs) with emphasis on small liberal arts colleges. A potential solution to alleviate some of these issues is proposed (a policy portfolio) and implemented. The initial results are presented and the subsequent influence of these results on club behavior is discussed
Using Amazon Prime Membership to Teach Compensating and Equivalent Variation
No full textThis paper uses indifference curve analysis to derive simple theoretical measures of the compensating and equivalent variation from joining (or canceling) a paid subscription service that provides access to lower prices, such as an Amazon Prime membership. The case provided here may be a useful tool for teaching an otherwise abstract concept in an undergraduate microeconomics course, as it extends the standard textbook approach to examine real-world questions of interest facing a well-known company. It is demonstrated that compensating and equivalent variation can serve as an important guide in the price-setting process under a business model of this type
Modeling on a Budget: Automating a Financial Modeling Course Without Subscription-Based Data Sources
No full textThe cost of popular fmance databases puts them out of reach of many smaller institutions. This article shows how data freely available online can be integrated efficiently into a financial modeling course. We show how to import finance data from various sources automatically including financial statements, stock prices and returns, bonds, and options. We also provide example spreadsheets of financial modeling exercises fed by this data. This study can help improve student learning of difficult finance concepts and build spreadsheet skills. It can also help instructors create in-class exercises, assignments, and exam questions more efficiently
The Simple Analytics of an eGig Firm: Uber as a Microeconomics Course Exercise
No full textThis paper provides a microeconomic framework for what we call the eGig firm in the transportation market. The pedagogical value lies in seeing the interrelatedness of principles that students may see as compartmentalized into consumer theory, production and costs, welfare economics, and so on. First, we develop a basic model of an eGig taxi firm, then address specific aspects of eGig transportation, including surge pricing and machine learning. We also examine social welfare implications of the eGig paradigm. The model is not complex, yet it gives students a unifying framework for topics covered in the undergraduate microeconomics course