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The Influence of University Investment Education on Asset Allocation
No full textUsing survey data from students at three universities, we examine the influence of an Investments Analysis course on student perception of the ideal asset allocation for a retirement portfolio. Consistent with previous studies that examine financial education in the workplace, a critical outcome of university investment education is the apparent alleviation of a conservative bias that is typically prevalent among uninformed investors. This change results in an increasing willingness to take larger stock positions, which produces higher expected returns and larger portfolio betas. Most importantly, however, the net effect is more efficient portfolios, particularly for those students who begin with the most inefficient starting portfolios
Testing Equity Portfolios for Alpha Bias: An Exercise for Student Investment Funds
No full textWe present an exercise that that guides students through the rationale and techniques for identifying and correcting for alpha bias in the reported performance of equity portfolios. The exercise is particularly relevant for Student Investment Fund programs that invest actual money, as the historical performance of the class portfolio can be used in the activity, which creates an additional level of engagement for students. Students learn why portfolios that emphasize smallcapitalization and/or value stocks tend to display a positive alpha bias (overstating performance), and why portfolios that emphasize largecapitalization and/or growth stocks tend to display a negative alpha bias (understating performance)
The Supply of Loanable Funds: A Comment on the Misconception and Its Implications
No full textRecently Fields-Hart publish two articles on interest rate determination in this journal. In both articles, they analyze interest rates on the basis of an unconventional definition of the supply of loanable funds. In this note we argue that their concept of the supply of loanable funds based on “spillover from the money market” is a gross misunderstanding of the concept. Although Fields-Hart considered their concept as “critically important part of their story,” the results in their first article are independent of this mistake. However, their second article continues this misconception and hence yields invalid results
Twitter and the Public Choice Course: A Pedagogical Vignette on Political Information Technology
No full textGiven the paucity of undergraduate textbooks in public choice, instructors often look for innovative approaches and unique examples when teaching undergraduate courses in public choice economics. This essay offers a pedagogical vignette for undergraduate courses in public choice that deals with the technological development in political information represented by “tweeting.” Twitter offers mobile communications services that some representatives use to boost their stock of political reputation capital
Student Managed Investment Fund Performance: A Look at Equity Portfolio Data
No full textResearch on the performance of student managed investment funds (SMIFs) is needed in the literature. Using data from a SMIF at a university in Florida, this paper provides some evidence of this performance while noting the importance of active portfolio management within the SMIF. The results underscore two points: 1.) University officials can rely on students to manage actual investment monies, with proper oversight. 2.) Active management of the SMIF can add value. The goal of this paper is to encourage schools to begin SMIFs and help convince university officials that active portfolio management by students is a good idea
Teaching Horizontal Mergers to Undergraduates: The Case of American Airlines and US Airways
No full textThis paper proposes a novel approach to teaching about horizontal mergers. We use the case of the recent airline merger between American Airlines and US Airways to analyze its potential economic impacts. We describe the merger, discuss the institutional details of the US government’s decision-making process of approving or rejecting mergers, and explain the merger’s trade-offs using the Williamson model of market power and economic efficiency. The paper provides lecture materials, including an Excel simulation, presentation and sample assignments that can be used by instructors teaching undergraduate courses in intermediate microeconomics, managerial economics, industrial organization, and law and economics
A Classroom Property Title Experiment
No full textEconomists such as de Soto (2000) posit that property titles are among the institutions that enhance human well-being. This paper presents a classroom property title exercise in which students may uncover for themselves the potential benefits of property titling on residential investment incentives. Players are faced with a series of rounds in which they must choose to build a low quality or high quality dwelling. Players are initially titleless squatters, but some property titles are randomly distributed between rounds. In each round, players receive a payoff from their housing investment but untitled properties also run the risk of confiscation
Common Resource Bargaining: A Collective-action Game
No full textWe present an intuitive, time-efficient common pool resource game set in a flexible framework that illustrates collective-action conflicts. The game\u27s interactions demonstrate that not all economic markets yield privately or socially efficient results. Students own tracts of land with access to oil. In the first (optional) stage, students manage the resource rights; in the second stage they make resource extraction decisions. Students\u27 understanding of markets deepens via the conflicts from interdependency versus incentives in common resource allocation. Economic issues addressed include collective action, contracting problems, game theory and externalities
Art of Econ: Incorporating the Arts through Active Learning Assignments in Principles Courses
No full textResearch has shown that, at the principles level, economics education relies predominantly on lectures for teaching. Introducing differentiated teaching by leveraging active learning provides a way for economics educators to increase students overall understanding and to assess competency at a higher level. In this paper, we provide instructors with a range of active learning assignments with relatively low costs for all participants. These assignments utilize a variety of economics-themed creative projects, which require students to determine which information is essential, use economics language clearly and precisely, and create deliverables that engage the audience with classroom material using an innovative approach
A Graphical Approach to Teaching the Capital Asset Pricing Model (CAPM) in Introductory Finance Courses
No full textThe relationship between risk and return is necessarily an important aspect of introductory finance courses. The Capital Asset Pricing Model (CAPM) is generally taught as the cornerstone model for measuring expected return given systematic risk as measured by beta, the market’s risk-free rate, and the market risk premium. In this paper, I demonstrate a graphical method of building up to, and introducing, the concept of the CAPM. Students generally find this method to be intuitive and helpful in understanding the concepts of correlation, diversification, efficient frontier, risk vs return, and CAPM